Wells Fargo Plunges After First Quarterly Loss Since 2008
Wells Fargo & Co. plummeted after reporting its first quarterly loss since 2008 as loan-loss provisions soared with the bank expecting a more severe downturn from the coronavirus pandemic.
The firm set aside a record $9.5 billion for credit losses, about $4 billion more than analysts had expected. Wells Fargo executives had warned they would earmark more for soured loans than the first quarter’s $4 billion as the pandemic continues to rage throughout the U.S. and weigh on companies and workers.
The San Francisco-based lender also cut its dividend to 10 cents a share from 51 cents. Wells Fargo said last month it would lower the payout after the Federal Reserve implemented a new rule tying dividends to earnings. The bank’s $2.4 billion loss in the second quarter was a stark turnaround from the near-record $6.2 billion in profit it posted a year ago.
“We are extremely disappointed in both our second-quarter results and our intent to reduce our dividend,” Chief Executive Officer Charlie Scharf said in a statement Tuesday. “Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter.”
The bank’s shares dropped 7.5% to $23.51 at 9:38 a.m. in New York, the biggest decline in the S&P 500 Financials Index. They’ve fallen 56% this year, more than double the index’s 24% slump.
Wells Fargo’s results show how bad the bank predicts things could get following a surge in unemployment and nationwide stay-at-home orders in the second quarter. Soured-loan provisions are spiking across the industry for the second straight quarter.