Wells Fargo (WFC) – Get report on Tuesday it posted a deeper-than-expected second-quarter loss and cut its dividend by a broader-than-expected margin as the coronavirus pandemic continued to hit earnings and the bank’s earnings outlook.
The San Francisco-based bank reported a net loss of $ 2.4 billion, or 66 cents a share, for the second quarter, versus revenue of $ 6.2 billion, or $ 1.30 per share, in the comparable quarter of the prior year . Analysts surveyed by FactSet had been looking for a loss of 16 cents a share.
Income reached $ 17.8 billion, down from $ 21.6 billion in the second quarter of 2019. Net interest income was $ 9.88 billion, decreased $ 2.2 billion in the year, while non-financial income they were $ 8 billion, down from $ 1.5 billion. Average deposits reached $ 1.4 trillion, an increase of $ 117.7 billion, or 9%, from the previous year.
Meanwhile, the fourth-largest US bank by assets accumulated nearly $ 10 billion in preparation for what it anticipates will be a wave of loan defaults.
He also confirmed plans to cut his dividend to 10 cents a share from the 51 cents he paid in each of the most recent four quarters, although the cut was more than Wall Street expected.
“We are extremely disappointed with our second quarter results and our intention to reduce our dividend,” CEO Charlie Scharf said in a statement, adding that the bank’s view of the length and severity of the economic downturn has “deteriorated considerably “from the assumptions used last quarter.
Wells Fargo announced in late June that it planned to cut its dividends, breaking the range with all other major Wall Street banks, following the Federal Reserve move to establish new restrictions on dividend payments to shareholders.
The move marks the first time since the 2008-2009 financial crisis that a major U.S. bank has reduced its quarterly shareholder reward.
On the positive side, Wells Fargo spread more loans, at least on average.
Average loans were $ 971.3 billion in the second quarter, an increase of $ 6.2 billion from the first quarter, the company said, while loan balances at the end of the period were $ 935.2 billion as of June 30. June, a decrease of $ 74.7 billion from March 31.
Meanwhile, business loans decreased $ 54.5 billion compared to March 31, “primarily due to a $ 54.9 billion decrease in business and industrial loans driven by the repayment of rotary lines that were drawn in March to beginning of the Covid-19 pandemic, “said the company
Consumer loans fell $ 20.1 billion compared to the previous quarter, driven by a decrease of $ 16.7 billion in real estate mortgage loans and junior liens, “as existing originations and line turns were more They were offset by payments and a reclassification of $ 10.4 billion in loans held on their books, as well as a $ 2.6 billion drop in credit card loans.
But he still reinforced his war chest in anticipation of a wave of defaults.
The bank set aside $ 6.03 billion for possible credit losses at its commercial banking unit and another $ 3.38 billion for possible losses at its consumer bank unit. The wealth and investment management unit set aside $ 257 million, the company said.
Wells Fargo shares fell 6.77% to $ 23.69 in trading on Tuesday.
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