The U.S. government has poured trillions of dollars into financial markets and launched stimulus programs to support individuals and small businesses whose income has stalled due to the virus.
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But the money has not gotten into people's hands immediately, leading Wells Fargo and other banks to offer forbearance for home, auto and credit-card borrowers who meet certain criteria.
With or without those programs, the unpaid bills are stacking up. Under a new accounting rule, banks must predict losses over the life of a loan and reserve that cash now, which led Wells Fargo to set aside some $3.83 billion in credit loss provisions, up from $845 million a year earlier.
"Our results were impacted by a $3.1 billion reserve build, which reflected the expected impact these unprecedented times could have on our customers,'' Chief Financial Officer John Shrewsberry said in a statement.
|WFC||WELLS FARGO & COMPANY||22.83||-0.82||-3.47%|
|JPM||JP MORGAN CHASE & CO.||92.74||-1.53||-1.62%|
The fourth-largest U.S. lender's quarterly profit fell to $42 million, or 1 penny per share, from $5.51 billion, or $1.20 per share, a year earlier.
The bank also reported an impairment of securities of $950 million due to the economic and market conditions.
Analysts had expected a profit of 33 cents per share, on average, according to Refinitiv data. It was not immediately clear whether the estimates were comparable.
Wells Fargo's revenue tumbled 18% to $17.7 billion in the quarter ended March 31, as the U.S. banking sector grapples with what is expected to be the worst recession in generations.
Earlier in the day, JPMorgan Chase & Co reported a 69% slump in first-quarter profit as the coronavirus pandemic forced the largest U.S. bank to boost reserves.