Wells Fargo reported results Tuesday, helping provide a picture of the impact coronavirus shutdowns are having on loans and the economy.
Photo: Andrew Seng for The Wall Street JournalWells Fargo & Co. posted its first quarterly loss in more than a decade and socked away nearly $10 billion to prepare for a wave of loan defaults.
The San Francisco-based bank lost $2.38 billion in the second quarter, compared with a profit of $6.21 billion a year earlier, as the novel coronavirus continued to pummel the economy. It was the bank’s first loss since the fourth quarter of 2008 and just its third loss of this century. Shares fell 5% in afternoon trading.
The bank lost 66 cents per share. Analysts polled by FactSet had expected a loss of 16 cents.
Wells Fargo set aside $9.57 billion in the second quarter to cover potential loan losses on top of the $3.83 billion it set aside in the first quarter.
Revenue of $17.84 billion was down 17% from $21.58 billion a year earlier.
Wells Fargo CEO Charles Scharf has been working to turn around the bank.
Photo: Tom Williams/Zuma PressThe lender has been hit hard by the economic collapse resulting from the coronavirus pandemic, which has forced many consumers and businesses to seek reprieve on their debt payments.
The bank set aside the most for potential loan losses in its commercial banking unit, where it has exposures across a range of hard-hit industries. It is also seeing higher charge-offs in its oil and gas and commercial real-estate portfolios. That unit provisioned $6.03 billion on top of the $2.29 billion it socked away in the first quarter.
The consumer-bank unit also provisioned $3.38 billion on top of the $1.72 billion in the prior quarter. The wealth and investment management unit set aside $257 million.
“Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter,” Chief Executive Charles Scharf said in a statement.
When the pandemic hit, Wells Fargo was already struggling to overcome a four-year-old fake-accounts scandal that has weighed on its business lines. Revenue in each of the bank’s business units fell in the second quarter compared with a year earlier.
The bank brought in Mr. Scharf last fall to help improve its reputation and get businesses back on track. He has prioritized resolving outstanding regulatory issues and restructuring the business lines.
Bowing to the profit pressure, the bank also said it expects to cut its quarterly dividend to 10 cents from 51 cents. The Federal Reserve told banks last month that they couldn’t pay out dividends in excess of their average profits over the last four quarters, causing Wells Fargo to say it would trim its dividend.
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Wells Fargo’s shares have fallen by more than half since the start of the year, by far the worst performance among the largest U.S. banks.
The bank has leaned heavily on cost cuts in recent years. While that has been hard to do during a pandemic that has created additional expenses, executives have indicated that they plan to renew those efforts this year, including by cutting jobs. Chief Financial Officer John Shrewsberry said last month that the bank wants to get “our total head count to as lean a state as we can responsibly operate.”
Expenses totaled $14.55 billion in the second quarter, up about 8% from $13.45 billion a year ago.
The bank’s net interest income fell 18% from a year ago to $9.88 billion, while its noninterest income fell 16% to $7.96 billion.
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Write to Ben Eisen at ben.eisen@wsj.com
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