Wells Fargo (NYSE: WFC) It was the laggard among the top three US banks that reported second-quarter earnings on Tuesday morning. In contrast to his peers JPMorgan Chase and Citigroup, missed estimates badly on both the top and bottom lines.
The bank made $ 17.8 billion in revenue in the second quarter, a decrease of almost 18% year-over-year. His net loss deepened to almost $ 2.4 billion ($ 0.66 per share), a dramatic change from his $ 6.2 billion net profit a year earlier. This was due to a 1.5% drop in total loans to $ 935 billion, and a 9% increase in average deposits to almost $ 1.4 trillion.
Image source: Wells Fargo.
On average, analysts who tracked the bank had been modeling $ 18.4 billion in revenue and a net loss of just $ 0.20 per share.
The main reason for Wells Fargo’s plunge into the red at the bottom line was the provisioning of credit losses in anticipation of the impending rise in loan defaults as the coronavirus-driven recession spreads.
Following the pattern that (and most other lenders) established in the first quarter, the bank again increased significantly the amount of money it allocated to cover those expected losses. For the second quarter, its loan loss provisions totaled $ 3.38 billion; A year ago, it was just $ 479 million.
As expected, the distressed bank also cut its next quarterly dividend to $ 0.10 per share, an 80% reduction from the previous payment of $ 0.51. At the current share price, the new dividend yields about 1.6%.
In the wake of earnings release Tuesday, Wells Fargo shares fell nearly 6% in mid-afternoon, while the broader stock market rose fractionally.
