Wells Fargo misses profit estimates in the first quarter by a significant margin

Wells Fargo & Co (NYSE:WFC) said on Tuesday that it made one cent of profit per share in the first quarter. Expecting the ongoing Coronavirus pandemic to fuel loan losses, the bank also said that it set aside roughly £3.2 billion.

The health crisis has pushed businesses into temporary shutdowns and unemployed around 10 million people so far. In the aftermath, banks had anticipated massive hits to earnings as companies and individual customers alike struggle to make timely payments for bills.

According to CEO Charlie Scharf, the American multinational financial services company has already offered fee waivers worth £23.95 million and has postponed £2.24 billion of payments.

Wells Fargo Suspends Its Lending Revenue Guidance For 2020

For credit loss provisions, the bank added, it set aside around £3.06 billion that is significantly higher than £675 million last year.

The bank’s executives also highlighted that Wells Fargo has temporarily halted its cost-cutting programmes due to the COVID-19 situation. Wells Fargo also suspended its lending revenue guidance for 2020.

At £770.55 billion, total loans were recorded 2% up due to an increase in corporate loans which exceeded the decline in credit card balances of the consumers and a few mortgage loans that were refinanced.

Wells Fargo’s statement also highlighted on Tuesday that its commercial, as well as the consumer business, posted a 6% increase in deposits in the first quarter.

The bank’s lending activities generated an 8% lower revenue in Q1. At £9.02 billion, this revenue wasn’t adjusted for loan provisions impact. Card fees and lower mortgage, according to Wells Fargo, also fuelled a massive 31% decline in fee income that was recorded at £5.11 billion in the first quarter.

Wells Fargo Was Expected To Make 33 Cents Of Profit Per Share In Q1

At £33.54 million (1 penny per share), the bank’s overall earnings came significantly lower than £4.40 billion that was recorded in the same quarter last year. According to Refinitiv, analysts had estimated the bank to make 33 cents of profit per share in the recent quarter.

At the time of writing, Wells Fargo is exchanging hands at £24.15 per share in the stock market that marks an around 45% decline in 2020 so far. Its performance in 2019, on the contrary, was recorded moderately upbeat with an annual increase of more than 15%.

Wells Fargo currently has a market cap of £98.68 billion and a price to earnings ratio of 7.45.