Wells Fargo & Co. is concentrating on controlling expenses, including the cost of bad mortgages, CEO John Stumpf said today at an investors conference in London.

The bank “continued to focus on corporate-wide expense reductions,” Bloomberg reported, based on Stumpf’s prepared remarks before a conference sponsored by Barclays PLC. Non-interest expenses dropped 5 percent in the first quarter from the final three months of 2010, according to the presentation.

The first quarter didn’t yet reflect a new companywide effort to identify reductions, and the San Francisco-based bank expects expenses tied to soured loans will drop if the economy doesn’t weaken, according to Stumpf’s prepared remarks.

Wells Fargo, as the second-largest U.S. mortgage servicer, faces scrutiny from federal regulators, state officials and consumer advocates over its handling of foreclosures. The lender was one of 14 of the largest servicers to sign consent decrees compelling them to overhaul procedures for seizing homes and to pay back homeowners for losses on foreclosures that were mishandled.

State and federal officials have been negotiating with the mortgage servicers, which include Citigroup Inc., Bank of America Corp., JPMorgan Chase & Co. and Ally Financial Inc., which handle almost 60 percent of U.S. home loans.

The five banks proposed paying $5 billion to settle the probe by all 50 states that’s being led by Iowa Attorney General Tom Miller into the mortgage servicing industry, two people familiar with the matter said earlier this month. Stumpf declined today to predict the outcome.

Wells Fargo is in the final year of integrating Wachovia Corp., and has reported more than $25 billion in profits after buying the North Carolina-based bank in 2008.