WFC Wells Fargo and Company

By Ben Eisen 

Wells Fargo & Co.'s first-quarter profit sank 89% and the bank set aside billions of dollars to cover potential losses on loans to borrowers hurt by the coronavirus pandemic.

The San Francisco-based bank made $653 million in profit compared with $5.86 billion in the year-earlier period. Earnings per share were 1 cent. Analysts polled by FactSet had forecast 38 cents.

Revenue of $17.72 billion was down 18% from $21.61 billion a year ago. That missed analyst expectations of $19.4 billion.

The spread of the coronavirus hit banks hard in the first quarter as it forced much of the country to stay home and eliminated millions of jobs. Corporations drew down on bank credit lines and consumers asked to pause debt payments.

The bank has begun setting aside money to cover losses on loans to customers that were hurt by the coronavirus and may not be able to pay their mortgages or commercial loans. Wells Fargo said it has set aside $3.83 billion to cover potential loan losses, up more than $3 billion from the previous quarter.

Before the crisis hit, Wells Fargo was already dealing with a fake-accounts scandal that has battered its reputation. The bank last year hired a new chief executive, Charles Scharf, an outsider tasked with resolving outstanding regulatory issues.

The bank's business lines have been lagging. Profit in each of its business units fell in the first quarter compared with the year-earlier period.

Wells Fargo has leaned heavily on cost cuts. Expenses in the first quarter totaled $13.05 billion, down 6% from $13.92 billion a year ago.

Still, it could be harder for banks to cut costs in the current health crisis. The coronavirus is forcing banks to spend money giving bonuses to front-line workers, deep-cleaning offices and setting up work-from-home capabilities.

In February, the bank reached a $3 billion settlement with the Justice Department and Securities and Exchange Commission, closing the door on a major portion of its legal problems.

However, the bank still faces regulatory problems, including a restriction on its growth. The Federal Reserve temporarily lifted a piece of that restriction after Wells Fargo said the sanction was forcing it to limit small-business loans.

The bank's net interest income fell 8% to $11.31 billion. The Federal Reserve last month cut rates to near zero, and lower rates crimp what banks can charge on loans.

Noninterest income 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)

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