Silver Spring, Md. (AP) — Wells Fargo lost $2.4 billion in the second quarter, the first quarterly loss for the bank since the real estate crash of 2008.
Wells said it set aside an additional $8.4 billion for loan loss provisions — the money set aside to cover potentially bad loans — more than double last quarter’s $3.83 billion as the effects of the coronavirus pandemic ravaged almost every aspect of its business.
With the coronavirus pandemic now in its fifth month in the U.S., Wells said the number of its loans that were 90 days or more past due jumped more than 34% from the same quarter last year. Infections are at record highs in several states and economies are shutting down again. Enhanced unemployment benefits for millions of people run out at the end of the month unless Congress acts, painting a potentially grim picture for the months ahead.
“Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter,” said Chief Executive Officer Charlie Scharf. The bank set aside $3.83 billion for potential loan losses in the first quarter.
Wells said it lost 66 cents per share in the April-June quarter. Analysts surveyed by FactSet expected a loss of 16 cents per share. The bank said its results were hit by losses in its portfolio of loans to the oil and gas and commercial real estate industries. The division that lends money and provides services to consumers and small businesses also lost money.
In the first full reporting period under coronavirus restrictions, the San Francisco-based bank said it had revenue of $17.84 billion in the quarter, down from $21.58 billion for the same period in 2019. The results fell short of Wall Street expectations of $18.4 billion.
Wells also said it would reduce its third quarter 2020 common stock dividend to 10 cents per share from 51 cents per share.
The nation’s biggest mortgage lender said its interest income fell to $9.9 billion, down $1.4 billion from the first quarter.
As if the current business environment wasn’t difficult enough, Wells has been operating under strict federal guidelines, limiting its ability to grow.
In 2018, the Fed capped the size of Wells Fargo’s assets after a number of beginning in 2016 with the uncovering of millions of fake checking accounts its employees opened to meet sales quotas. The Fed lifted that cap earlier in April as part of the federal government’s Payroll Protection Program because many of Wells’ small business customers were getting shut out from applying.
Shares in Wells Fargo fell nearly 6% in premarket trading.