Wells Fargo set aside some $4 billion in loan-loss provisions in the first quarter related to the Covid-19 pandemic and corresponding economic fallout, almost five times what it allocated a year ago and the most in a decade, leading to a near-90% drop in net income.
The San Francisco-based bank reported net income of $653 million, or 1 cent a share, for the first quarter vs. $5.9 billion, or $1.20 a share, in the comparable year-earlier quarter.
That number, however, included the impact of building up a $3.1 billion war chest, the equivalent of 56 cents a share, and so-called impairment of securities of $950 million, or a hit of 17 cents a share, “driven by economic and market conditions,” the bank said in a statement.
That added up to a nearly $4 billion buffer to protect the bank from all types of losses related to loans, investments and commercial and consumer banking and services.
“Wells Fargo plays an important role in the financial system and the economic strength of our country, and we take our responsibility seriously, particularly in these unprecedented times,” CEO Charlie Scharf said in a statement.
Revenue came in at $17.7 billion, down from $21.6 billion in first quarter of 2019. Net interest income was $11.3 billion, down $999 million, while non-interest income was $6.4 billion, down $2.9 billion. Average deposits rang in at $1.3 trillion, up $75.9 billion, or 6%, from a year earlier.
Average loans were $965 billion in the first quarter, up $8.5 billion from the fourth quarter. Period-end loan balances were $1 trillion at March 31, up $47.6 billion from December 31, 2019.
Commercial loans were up $52 billion compared with December 31, 2019, "... predominantly due to $50.9 billion of growth in commercial and industrial loans driven by draws of revolving lines and origination of new lending facilities due to the impact of the Covid-19 pandemic on economic and market conditions," the bank said.
Nonperforming assets increased $759 million, or 13%, from the fourth quarter of 2019 to $6.4 billion, "... as the effect of the Covid-19 pandemic on market conditions began to impact our customer base."
Shares of Wells Fargo were up 1.59% at $31.93 in trading on Tuesday.
This article originally appeared on The Street.
