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Wells Fargo swings to $2.4 billion loss as pandemic bites

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(Reuters) – Wells Fargo & Co swung to a second-quarter loss as the coronavirus set back the bank’s progress in recovering after a series of misselling scandals, forcing it to set aside billions of dollars to cover potential loan losses and slash its dividend.

The bank, among the United States’ biggest mortgage lenders, reported a net loss of $2.4 billion, or 66 cents per share, for the quarter ended June 30, compared with a profit of $6.2 billion, or $1.30 per share, in the year-earlier period.

Analysts had expected Wells Fargo to report a loss per share of 20 cents, according to Refinitiv. It was not immediately clear whether those estimates were comparable to the bank’s results.

U.S. lenders began building up reserves in the first quarter to cover defaults from consumers and companies as the COVID-19 pandemic slammed the brakes on the economy, but with cases again surging the scale of the likely losses remains anyone’s guess.

Wells Fargo, which reported its first quarterly loss since December 2008, set aside $9.57 billion in credit loss provisions in the second quarter of the year, up from $503 million a year earlier.

The San Francisco-based bank also cut its dividend for the third quarter to 10 cents per share from 51 cents previously to reflect the U.S. Federal Reserve’s recent curbs on bank dividends.

“We are extremely disappointed in both our second quarter results and our intent to reduce our dividend. Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter,” Chief Executive Charlie Scarf said in a statement.

Net interest income fell 18% from the prior period, as interest rates have fallen to near zero. Total revenue fell to $17.84 billion from $21.58 billion a year earlier.

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