Wells Fargo posts first loss in more than a decade

Wells Fargo plans to cut dividend to 10 cents from 51 cents

Wells Fargo & Co. posted its first quarterly loss in more than a decade as it socked away money to prepare for a wave of soured loans.

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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.

The bank lost 66 cents per share. Analysts polled by FactSet had expected a loss of 16 cents.

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Revenue of $17.84 billion was down 17% from $21.58 billion a year earlier. The 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.

Wells Fargo set aside $9.57 billion to cover potential loan losses in the second quarter on top of the $3.83 billion it set aside in the first quarter.

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. The bank brought in CEO Charles 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.

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Bowing to the profit pressure, the bank also said it expects to cut its quarterly dividend to 10 cents from 51 cents, subject to approval by its board of directors. 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.