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Wells Fargo reported worse than expected Q2 earnings before the bell on Tuesday with its first quarterly loss since the Great Recession. $WFC reported along with JPMorgan $JPM

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Wells Fargo & Co NYSE: WFC Reported Earnings Before Open Tuesday

 ($0.66) Missed ($0.20) EPS And $17.80 Bil Missed $18.40 Billion Forecast in Revenue 

Earnings

Wells Fargo posted its first quarterly loss since the Great Recession as the bank set aside $8.4 billion in loan loss reserves tied to the coronavirus pandemic.

WFC had a net loss of $2.4 billion in the second quarter, or a loss of 66 cents a share, worse than the 20 cents a share loss expected by analysts surveyed by Refinitiv. Revenue of $17.8 billion was also weaker than analysts’ $18.4 billion estimate. The bank also cut its quarterly dividend of 10 cents a share, a deeper-than-expected reduction in its payout.

Las October Wells Fargo had announced the appointment of Charles W. Scharf as the new Chief Executive Officer and President, effective October 21. Scharf was previously Chairman and CEO at Bank of New York Mellon.

 

Wells Fargo & Co NYSE: WFC

Market Reaction 23.43 USD −1.98 (-7.79%)

“We are extremely disappointed in both our second quarter results and our intent to reduce our dividend,” CEO Charlie Scharf said in the release. “Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter, which drove the $8.4 billion addition to our credit loss reserve in the second quarter.”

Highlights

  • The bank’s net interest margin, a key measure of a bank’s profitability, plunged by 33 basis points from the prior quarter to 2.25%, below the 2.33% estimate of analysts surveyed by FactSet.
  • Wells Fargo was the only bank among the six biggest U.S. lenders to be forced to cut its dividend after the annual Federal Reserve stress test; all the others are maintaining their quarterly payouts.

WFC Earnings Q2 20

 

Wells Fargo and JPMorgan are among the nearly 4,600 lenders participating in the Paycheck Protection Program. The SBA said that as of 3 p.m. on Monday, more than 941,000 loan applications had been approved, amounting to $228 billion of the $350 billion available.

 

Wells Fargo is still trying to recover from the fake account scandal surrounding its sales practices, in which employees in its consumer banking division created fake accounts amid a high-pressure sales environment. More issues surrounding the bank's practices continue to surface. The Fed in February last year barred the bank from growing until it "sufficiently improves its governance and controls."

Source: WFC, AlphaStreet

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