Wells Fargo registers £2.15 billion of net loss as COVID-19 weighs on performance in Q2

Wells Fargo & Co. (NYSE: WFC) published its quarterly financial results on Tuesday that highlighted the bank to have swung to a broader than expected loss in the second quarter. The loss marks the first for Wells Fargo since the market crash of 2008. On the contrary, Citigroup published a stronger than expected earnings report for the second quarter on Tuesday.

Shares of the company were reported about 6% down in premarket trading on Tuesday. At £19.14 per share, Wells Fargo is currently more than 50% down year to date in the stock market. Learn more about how to choose winning stocks.

Wells Fargo reports a 17% decline in Q2 revenue

The company attributed its dovish performance to the Coronavirus pandemic that fuelled loan losses in recent month. The U.S. investment bank set aside £16.33 billion in total to cover for loan losses including an increase of £5.12 billion for commercial loans. In the first quarter, the bank had set aside a much lower £9.60 billion. Wells Fargo ordered its employees last week to remove TikTok from their phones due to security concerns.

The American financial services company saw £2.15 billion of net loss in the second quarter that translates to 52.82 per share. In the same quarter last year, it had reported a net income of £4.68 billion or £1.04 per share. According to FactSet, experts had forecast the company to register 12.80 pence of loss per share in Q2.

In terms of revenue, Wells Fargo posted a 17% year over year decline to £14.28 billion in the second quarter as compared to £14.72 billion expected. At £7.92 billion, its net interest income tanked by 18% in Q2 versus the experts’ forecast of £8.24 billion. Its noninterest income, on the other hand, also registered a 16% decline in the recent quarter to £6.40 billion that also came slightly shy of £6.48 billion that analysts estimated. The bank’s market-sensitive revenue within noninterest income was £1.28 billion.

Wells Fargo’s net interest margin drops to 2.25%

Wells Fargo also highlighted in its earnings report on Tuesday that its net interest margin dropped from 2.82% last year to 2.25% in Q2. Experts had anticipated its net interest margin to come in at 2.33% in the second quarter.

The San Francisco-based bank also reduced its dividend on Tuesday from 40.81 pence per share that it announced earlier.

At the time of writing, the U.S. investment bank is valued at £78.51 billion and has a price to earnings ratio of 8.45.