Wells Fargo Q220 reports a net loss of $2.4bn compared with net income of $6.2bn in the year ago quarter. Moreover, Wells Fargo is cutting its dividend by 80% from $0.51 per share to $0.10 per share.
CEO Charlie Scharf says: “We are extremely disappointed in both our second quarter results and our intent to reduce our dividend. Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter, which drove the $8.4bn to our credit loss reserve in the second quarter.
Go deeper with GlobalData
“While the negative impact of the pandemic is unprecedented and many of our business drivers were negatively impacted, our franchise should perform better, and we will make changes to improve our performance regardless of the operating environment.”
Wells Fargo Q220: $1.2bn of operating losses
The second quarter results include $1.2bn of operating losses, primarily due to customer remediation accruals. Additionally, the bank reports higher personnel and occupancy expense due to Covid. Net interest income in the second quarter of $9.9bn is down by $1.4bn from first quarter 2020. Moreover, the net interest margin of 2.25% is down by 33 basis points from the prior quarter. Second quarter revenue of $17.8bn is weaker than analysts forecast of $18.4bn.
Wells Fargo’s retail banking focused Community Banking unit posts a second quarter net loss of $331m. In the year ago quarter, the unit reported net income of $3.1bn.
Revenue decreased $3.0bn or 26% y-o-y driven by lower net interest income, mortgage banking revenue, service charges on deposit accounts, card fees, trust and investment fees, and lower gains from the sale of residential mortgage loans.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThis is partially offset by higher market sensitive revenue reflecting higher deferred compensation plan investment results. Provision for credit losses increase by $2.9bn, predominantly due to a $2.8bn increase in the allowance for credit losses in second quarter 2020 driven by current and forecasted economic conditions due to the Covid.
Wells Fargo Q220 retail banking highlights
Primary consumer checking customers of 24.3 million are up 0.4% from a year ago. Wells Fargo now has 31.1 million digital banking customers, including 25.2 million active mobile banking customers. The bank ends the second quarter with 5,300 retail bank branches, reflecting 30 branch consolidations in the quarter.
Margin pressure is reflected in a 57-basis point fall y-o-y in the net interest margin to 2.25%.
Average deposits rise by 9.2% y-o-y to $1.39trn. Meantime, average loans rise by 2.5% to $971.3bn.
Wells Fargo share price is unmoved on release of its second quarter numbers but down by 52% for the year to date.
