By Ben Eisen
Wells Fargo & Co.’s first-quarter revenue sank 89% and the financial institution put aside billions of {dollars} to cowl potential losses on loans to debtors damage by the coronavirus pandemic.
The San Francisco-based financial institution made $653 million in revenue in contrast with $5.86 billion within the year-earlier interval. Earnings per share have been 1 cent. Analysts polled by FactSet had forecast 38 cents.
Income of $17.72 billion was down 18% from $21.61 billion a 12 months in the past. That missed analyst expectations of $19.four billion.
The unfold of the coronavirus hit banks arduous within the first quarter because it compelled a lot of the nation to remain dwelling and eradicated thousands and thousands of jobs. Firms drew down on financial institution credit score strains and customers requested to pause debt funds.
The financial institution has begun setting apart cash to cowl losses on loans to clients that have been damage by the coronavirus and will not have the ability to pay their mortgages or industrial loans. Wells Fargo mentioned it has put aside $3.83 billion to cowl potential mortgage losses, up greater than $Three billion from the earlier quarter.
Earlier than the disaster hit, Wells Fargo was already coping with a fake-accounts scandal that has battered its repute. The financial institution final 12 months employed a brand new chief government, Charles Scharf, an outsider tasked with resolving excellent regulatory points.
The financial institution’s enterprise strains have been lagging. Revenue in every of its enterprise models fell within the first quarter in contrast with the year-earlier interval.
Wells Fargo has leaned closely on value cuts. Bills within the first quarter totaled $13.05 billion, down 6% from $13.92 billion a 12 months in the past.
Nonetheless, it might be tougher for banks to chop prices within the present well being disaster. The coronavirus is forcing banks to spend cash giving bonuses to front-line staff, deep-cleaning places of work and establishing work-from-home capabilities.
In February, the financial institution reached a $Three billion settlement with the Justice Division and Securities and Change Fee, closing the door on a serious portion of its authorized issues.
Nonetheless, the financial institution nonetheless faces regulatory issues, together with a restriction on its progress. The Federal Reserve quickly lifted a bit of that restriction after Wells Fargo mentioned the sanction was forcing it to restrict small-business loans.
The financial institution’s web curiosity revenue fell 8% to $11.31 billion. The Federal Reserve final month reduce charges to close zero, and decrease charges crimp what banks can cost on loans.
Noninterest revenue fell 31% to $6.41 billion.
Write to Ben Eisen at ben.eisen@wsj.com
(END) Dow Jones Newswires
April 14, 2020 09:06 ET (13:06 GMT)
Copyright (c) 2020 Dow Jones & Firm, Inc.
