Wells Fargo (NYSE:WFC) on Tuesday posted its first quarterly loss since the financial crisis as the bank set aside $8.4 billion in loan loss reserves tied to the coronavirus pandemic.
The bank had a net loss of $2.4 billion in the second quarter, or a loss of $0.66 a share, worse than the 20 cents a share loss expected by analysts.
Revenue of $17.8 billion was also weaker than analysts’ $18.4 billion estimate.
Wells Fargo, the embattled banking giant, was widely expected to post a loss as it had telegraphed its need to set aside billions of dollars for soured loans tied to the coronavirus pandemic.
The company is laboring under a dozen regulatory consent orders tied to its 2016 fake accounts scandal, including one from the Fed that caps its asset growth. These have stung the bank, and CEO Charlie Scharf strongly hinted last month that he would have to cut expenses and jobs.
The bank’s bleak outlook for profits is one reason it was forced by regulators to cut its dividend from its previous level of 51 cents a share.
But on Tuesday the bank announced a new quarterly dividend of 10 cents a share, a deeper-than-expected reduction to its payout that may indicate the bank is being cautious about the coming year.
Wells Fargo was the only bank among the six biggest U.S. lenders to be forced to cut its dividend after the annual Federal Reserve stress test; all the others are maintaining their quarterly payouts.
The bank is hamstrung by its structure: Unlike JPMorgan Chase (NYSE:JPM) or Citigroup (NYSE:C), Wells Fargo lacks a sizable Wall Street trading division, and that business has been on fire this year amid surging volatility and unprecedented Federal Reserve support.
In part because of the Fed restriction, Wells Fargo has also pulled back from swaths of the mortgage and auto market, particularly in riskier products like jumbo home loans.
Shares retreated $1.52, or 6%, to $23.89.
