Wells Fargo tumbles into the red, slashes dividend
US bank Wells Fargo has slashed its dividend after lower interest rates and soaring credit provisions prompted a slide into the red.
The main street lender, one of America's biggest, reported a second-quarter net loss of $2.38bn, compared with net income of $6.21bn a year previously. Diluted losses per common share were $0.66, against last year’s earnings per share of $1.30.
Weighing heavily on the numbers was a steep hike in the credit provisions, up $9.0bn year-on-year to $9.5bn.
Revenues fell to $17.8bn from $21.6bn, missing analyst expectations for around $18.5bn. Net interest income fell 18% to $9.9bn, while non-interest income fell $1.5bn to $8.0bn.
The bank also announced on Tuesday it planned to cut its third-quarter dividend to just $0.10 a per share, from $0.51 share.
Charlie Scharf, chief executive, called the results and proposed dividend reduction “extremely disappointing”.
He continued: “Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter, which drove the $8.4bn addition to our credit loss reserve.
“While the negative impact of the pandemic is unprecedented, and many of our business drivers were negatively impacted, our franchise should perform better, and we will make changes to improve our performance regardless of the operating environment.”
Explaining the decision to cut the dividend, which is subject to board approval, Scharf said: “We believe it is prudent to be extremely cautious until we see a clear path to broad economic improvement.
“We are confident that this eventual economic improvement combined with our actions to increase our margins will support a higher dividend in the future.”
As at 1415, Wells Fargo had lost 6% in pre-market trading.