Folks stroll by a Wells Fargo bank department on October 13, 2017 in New York Metropolis.Spencer Platt | Getty ImagesWells Fargo warned on Monday that it’ll seemingly reduce its dividend after the Federal Reserve introduced it will cap dividends for banks primarily based on earnings. Wall Street analysts pointed to Wells Fargo as a possible candidate to chop its dividend following the announcement by the central bank final week, which got here after the stress exams the Fed provides to main monetary establishments.The corporate’s earlier quarterly frequent stock dividend was 51 cents per share. The bank mentioned in a press launch that it expects to announce the brand new dividend when it experiences quarterly earnings on July 14. Shares of the bank fell 1.7% in prolonged buying and selling. Charlie Scharf, the bank’s chief govt officer, mentioned in a press launch that Wells Fargo expects to take one other enhance within the provision for loan losses that’s “considerably greater” than final quarter’s enhance. The expansion of that provision will put downward strain on the bank’s earnings. “These are definitely extraordinarily difficult occasions for a lot of and we stay dedicated to supporting our prospects and communities, and we are going to proceed to take acceptable measures to take care of robust capital and liquidity ranges and to enhance the earnings capability of the corporate,” Scharf mentioned within the launch.Shares of Wells Fargo rose 1.4% on Monday forward of the announcement. On Friday, following the central bank’s choice, the stock fell 7.4%. Shares are down greater than 50% 12 months so far.The Fed’s transfer to cap dividends and ban buybacks got here out of its stress exams of main monetary firms, which this 12 months included an overlay of financial situations associated to the coronavirus pandemic.Main banks suspended their buybacks voluntarily earlier within the disaster however have been reluctant to scale back their dividend funds, that are seen as a gradual supply of revenue for traders. The trade was compelled to chop dividends after the 2008 monetary disaster, and the Fed didn’t permit banks to lift dividends till 2011.Scharf, who took over as CEO final October, pointed to retirees as one group that depends on dividends throughout a banking convention in May. “The board acknowledges the significance of dividends and simply the place these dividends go. These dividends wind up in retirees’ palms, in savers’ palms. These are the folks which can be investing both straight or via numerous funds, and it is essential, and so we perceive that,” Scharf mentioned. Wells Fargo should navigate different restrictions that its friends don’t, together with an asset cap from the Fed that was imposed after a scandal involving faux accounts. The asset cap was modified in April to permit the bank to extra simply facilitate loans used within the coronavirus aid efforts from the federal authorities.The bank’s struggles lately have weighed on its stock price, due to this fact pushing the dividend yield greater. Previous to Monday’s announcement, the stock carried a dividend yield of roughly 8%, effectively above these of different giant U.S. banks.—CNBC’s Hugh Son contributed to this story.