Wells Fargo Breaks Ranks With Brethren in Cutting Dividend

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Wells Fargo  (WFC) - Get Report is the first major U.S. bank to slash its dividend in the wake of the coronavirus and economic downturn.

The San Francisco-based bank said it will cut its dividend, breaking rank with all of Wall Street’s other big banks, following the Federal Reserve’s move to set new restrictions on dividend payouts to shareholders.

The fourth-biggest U.S. bank by assets announced it plans to cut its dividend from the 51 cents it paid in each of the four most-recent quarters. The bank said it would announce its payout when it reports second-quarter earnings on July 14.

The move marks the first time since the financial crisis that a major U.S. bank has slashed its quarterly reward to shareholders, though it also comes as the Fed literally backstops banks and other lenders with almost free money to keep cash flowing through the economy amid the coronavirus pandemic and ensuing economic collapse.

In releasing the results of its annual stress test on the industry last week, the Fed capped dividends at the largest 33 banks at current levels to ensure banks continue to preserve their own cash in the event the financial system comes under additional strain.

The Fed has also told companies they can’t resume buybacks, which were suspended in March to preserve capital as the pandemic was spreading. 

The central bank said it might conduct another exam using a harsher economic scenario later this year, limiting firms’ ability to gauge prospects for dividends for the rest of the year.

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