Wells Fargo on Tuesday reported its first quarterly loss since 2008, losing $2.4 billion as the pandemic’s economic shocks ravaged nearly every line of its business.
In a sign of more trouble ahead, the bank added $8.4 billion to its reserve for loan losses, more than twice what it set aside last quarter. It said it would, for the first time since the Great Recession, cut its dividend this quarter, dropping its payments to investors to 10 cents a share, down from the 51 cents it has paid for the last few quarters.
Charles W. Scharf, the bank’s chief executive, said he was “extremely disappointed” with the bank’s performance.
“While the negative impact of the pandemic is unprecedented and many of our business drivers were negatively impacted, our franchise should perform better,” he said in a statement. “We will make changes to improve our performance regardless of the operating environment.”
The bank’s revenue for its second quarter, which ended June 30, dropped to $17.8 billion, down nearly 18 percent from a year ago. Last year, it earned $6.2 billion during the quarter.
Wells Fargo is bracing for coming losses on its commercial loans, especially in real estate, where it set aside $6.4 billion. Consumer loans, especially mortgages, are also flashing warning lights; the bank added $2 billion to cover anticipated losses there.
Revenue at Delta Air Lines declined by 88 percent in the second quarter compared to a year earlier, reflecting what its chief executive described as the “truly staggering” toll the coronavirus pandemic has had on the aviation industry. That decline contributed to a $5.7 billion quarterly loss, compared to last year’s $1.4 billion profit.
“Given the combined effects of the pandemic and associated financial impact on the global economy, we continue to believe that it will be more than two years before we see a sustainable recovery,” Ed Bastian, Delta’s chief executive officer, said in a statement.
Delta said it ended the quarter with $15.7 billion in cash on hand and cut its daily cash losses to $27 million per day, down from $100 million per day during the depths of the crisis. The company hopes to stop that daily bleeding by year’s end.
The company’s quarterly losses were driven by a 93 percent decline in passengers, though they included a more than $2 billion write-down associated with investments in a trio of troubled foreign carriers: Latam Airlines Group, Grupo Aeroméxico and Virgin Atlantic.
More than 45,000 employees have taken temporary voluntary unpaid leave. Last week, United Airlines said it could furlough as many as 36,000 workers when federal stimulus funding for payroll runs out at the end of September. Delta has not yet detailed what impact the expiration of funds may have, though it did warn nearly 2,600 pilots last week that they could be furloughed.
JPMorgan Chase on Tuesday revealed that it had earned $4.7 billion during the months of April, May and June, just under half of what it earned during the same period a year ago, as it diverted billions of dollars to a reserve fund in order to prepare for a potential economic shock.
Despite the drop in earnings, another number suggested a boom time. While businesses and many regular services in vast swaths of the United States were closed to try to stem the coronavirus pandemic, JPMorgan brought in the largest quarterly revenue haul in its history: nearly $34 billion, compared to just over $29 billion in the second quarter of 2019. The increase was driven by a surge in its Wall Street businesses, including trading in stocks, bonds and other financial market instruments, where a record haul of $16 billion in JPMorgan’s Corporate & Investment Bank division represented a 66 percent increase from last year.
The bank added nearly $11 billion to the pool of money it keeps ready to cover any losses, $9 billion more than last year. Of that, almost $6 billion was designated to handle losses on loans to consumers, including credit cards.
Citigroup said Tuesday that its quarterly profit fell 73 percent as it set aside $5.6 billion to cover loan losses triggered by the widespread unemployment caused by the pandemic.
As the third largest credit issuer in the United States, Citigroup is particularly vulnerable to increases in credit card delinquencies, which tend to dovetail with rises in unemployment. The bank said it has offered forbearance on 2 million credit card accounts representing six percent of balances so far.
Net income fell to $1.3 billion in the second quarter of 2020 from $4.8 billion a year ago. Revenue rose 5 percent to $19.77 billion as the pace of trading activity rose.
May was supposed to be the first month of Britain’s economic recovery, when some restrictions on business activity were eased after the near-total lockdown of April. Some economists predicted the economy would grow by 5.5 percent after contracting by nearly 7 percent in March and a further 20 percent in April. But the data announced Tuesday was greeted as a disappointment, showing just a 1.8 percent increase from the month before.
The British government allowed some manufacturing and construction activity to resume in mid-May, and output in both sectors rose by more than 8 percent. However, the larger services sector remained lackluster, growing by less than 1 percent from April, as about 16 percent of businesses reported having no revenue in the month.
The outlook for the rest of this year remains bleak. The independent Office for Budget Responsibility laid out three scenarios for the trajectory of the British economy, all of which foresee an unprecedented increase in public borrowing to try to offset the economic shock of the pandemic.
“The U.K. is on track to record the largest decline in annual G.D.P. for 300 years, with output falling by more than 10 percent in 2020 in all three scenarios,” the OBR said in a report published Tuesday.
In its central scenario, the office said economic output would return to its pre-pandemic peak by the end of 2022, and the unemployment rate would rise to 10.1 percent next year.
Stocks fell on Tuesday amid a re-tightening of restrictions on businesses and fresh data showing slower-than-expected economic activity.
The S&P 500 fell about half a percent in early trading. European markets were broadly lower, most by more than 1 percent and stocks in Asia also fell.
On Wall Street, the decline added to a sell-off that began late on Monday as concern about the continued spread of the coronavirus overwhelmed an early rally. The S&P 500 dropped more than 2 percent from its highest point on Monday, to end the day with a nearly 1 percent decline.
Stock trading has become more turbulent lately amid rising concerns that large states would have to pull back on their reopening plans. In California, the governor announced a sweeping rollback on Monday, ordering the closure of indoor operations statewide for restaurants, wineries, movie theaters and zoos. Bars would also be forced to close all operations. Similar actions were predicted in Texas.
Adding to the uncertainty is earnings season, which offers investors their first chance to hear from businesses about how the pandemic has hurt profits. On Tuesday, JPMorgan reported that its earnings had halved in the second quarter, while Wells Fargo had its first quarterly loss since 2008, and Delta Air Lines said revenue plunged by 88 percent.
In Britain, there were hopes that the government’s economic data for May, when some restrictions on businesses eased following April’s near-total lockdown, would show a strong upswing from the month before. But the data released Tuesday reported that the economy grew by only 1.8 percent in May, far less than the 5.5 percent widely predicted. The government’s independent budget review office said Britain was on track for “the largest decline in annual G.D.P. for 300 years.”
Retail sales in the eurozone, which plunged to record lows while millions were confined, surged 17.8 percent in May compared with the month before, as people fanned out to buy furniture, electronics, clothing and computer equipment, Europe’s statistics agency reported this week. The biggest gains are in France and Germany, where spending has rebounded to near pre-confinement levels.
The current binge has doused some worries that Europeans might feel too shaken to spend again, as happened in China, where many chose to curtail expenditures after losing their jobs or having their pay slashed.
“Consumers are driving the rebound across much of Europe more than expected,” said Holger Schmieding, chief economist of Berenberg Bank. “There is a relief that lockdowns are over.”
But whether people will keep opening their wallets remains to be seen. Spending is still around 7 percent lower than where it was before the pandemic hit.
For now, at least, patrons have not stopped flocking to socially distanced sidewalk tables at cafes and bistros in France. Dutch flower and plant suppliers are reporting record demand as shoppers crowd do-it-yourself stores around Europe to beautify their homes. In Germany, families are heading to malls to buy new appliances after the government lowered the value-added tax to stimulate sales.
In March, the Advertising Council, a nonprofit organization that creates public service announcements about social issues, was days away from introducing a campaign with the White House about work force training when the economy locked down. The ads finally debuted on Tuesday, retooled to address the pandemic’s devastating effect on jobs.
With more than 18 million workers receiving jobless benefits in late June, the effort focuses on education and certification resources that can be found online. The campaign, created with partners like Apple and IBM, was originally called “Choose Something New,” meant as an inspirational message to people looking to change career paths. It became “Find Something New,” focusing on those struggling to find work during a national emergency.
“The tone of the campaign really needed to shift to be more urgent and actionable,” said Michelle Hillman, the chief campaign development officer at Ad Council. “We needed to really understand the landscape of what was happening.”
More companies are cautiously venturing back into marketing as states try to reopen. After several months focusing on health-related messaging, Ad Council recently revisited the work force campaign, which now includes rewritten copy and workers filmed at a distance using iPhones.
The campaign will run in space donated by television networks like Fox and NBC, digital platforms like Facebook and Snap and in print publications and on billboards. Viewers will be directed to resources at FindSomethingNew.org.
It was harrowing enough for small businesses — the bars, dental care practices, small law firms, day care centers and other storefronts that dot the streets of every American town and city — to have to shut down after state officials imposed lockdowns in March to contain the pandemic.
But the resurgence of the virus, especially in states such as California, Florida and Texas that had begun to reopen, has introduced a far darker reality for many small businesses: Their temporary closures might become permanent.
Nearly 66,000 businesses have folded since March 1, according to data from Yelp, which provides a platform for local businesses to advertise their services and has been tracking announcements of closings posted on its site. Small businesses account for 44 percent of all U.S. economic activity, according to the Small Business Administration, and closures on such an immense scale could devastate the country’s economic growth.
On the last Friday of June, after Gov. Greg Abbott of Texas said that bars across the state would have to shut down a second time because coronavirus cases were skyrocketing, Mick Larkin decided he had enough. He and his partner decided to close their club, Krank It Karaoke in Wichita Falls, Texas, for good.
“We did everything we were supposed to do,” Mr. Larkin said. “When he shut us down again, and after I put out all that money to meet their rules, I just said, ‘I can’t keep doing this.’”
KFC, the fried chicken chain, closed dining rooms in all 40 of its corporate-owned restaurants in Florida on Monday as coronavirus cases in the state continued to skyrocket.
The company encouraged franchisees operating stores in Florida and other virus “hot spot states” such as Arizona, California and Texas to follow suit. Corporate-owned locations in Florida will continue to offer drive-through, carry out and delivery where available.
“This guidance is part of our continued efforts to prioritize the health of our team members, customers, and the communities where they live and work,” said a representative for KFC.
On Sunday, Florida reported more than 15,000 new cases, the highest single-day total of new coronavirus cases by state since the start of the pandemic. The state reported more than 12,000 new cases on Monday.
The pandemic has hit the restaurant industry particularly hard, many fast food chains have managed to stay afloat by relying on drive-through sales. McDonald’s delayed reopening dining rooms earlier this month as coronavirus cases surged across the country.
KFC is a subsidiary of Yum Brands, which owns other fast food chains including Pizza Hut and Taco Bell.