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Wells Fargo Issues Statement Regarding the Federal Reserve's Stress Test Feedback; Expects Q3 Dividend To Be Reduced From Current Level

SAN FRANCISCO--(BUSINESS WIRE)-- Wells Fargo & Company (NYSE:WFC) today commented on the results of the Federal Reserve Board’s (FRB) Dodd-Frank Act stress test and related Comprehensive Capital Analysis and

Benzinga · -

SAN FRANCISCO--(BUSINESS WIRE)-- Wells Fargo & Company (NYSE:WFC) today commented on the results of the Federal Reserve Board’s (FRB) Dodd-Frank Act stress test and related Comprehensive Capital Analysis and Review (CCAR), including the FRB’s instructions regarding capital distributions through the end of third quarter 2020.

The FRB is requiring the nation’s largest banks, including Wells Fargo, to update and resubmit their capital plans within 45 days after the FRB provides updated scenarios. Requiring resubmission will prohibit each bank from making any capital distribution (excluding any capital distribution arising from the issuance of a capital instrument eligible for inclusion in the numerator of a regulatory capital ratio), unless otherwise approved by the FRB. Through the end of the third quarter of 2020, the FRB is authorizing each bank to:

  • Make share repurchases relating to issuances of common stock related to employee stock ownership plans.
  • Provided that the bank does not increase the amount of its common stock dividends, pay common stock dividends that do not exceed an amount equal to the average of the bank’s net income for the four preceding calendar quarters, unless otherwise specified by the FRB.
  • Make scheduled payments on additional tier 1 and tier 2 capital instruments.

Based on these instructions, the company expects its common stock dividend in third quarter 2020 will be reduced from the current level of $0.51 per share. The company expects that the level of the third quarter dividend will be announced when it releases second quarter financial results on July 14, 2020.

In addition, following the FRB’s final publication of the CCAR results, the company expects its stress capital buffer to be 2.5%. The stress capital buffer represents a percentage amount of excess capital the company must hold above its minimum capital requirements beginning in October 2020. The stress capital buffer of 2.5% reflects a reduction in quarterly common stock dividends for the stress capital buffer period from the company’s current level of $0.51 per share.

“There remains great uncertainty in the path of the economic recovery and though it’s difficult to accurately predict the ultimate impact on our credit portfolio, our economic assumptions have changed significantly since last quarter. Accordingly, we expect our second quarter results will include an increase in the allowance for credit losses substantially higher than the increase in the first quarter,” said CEO Charlie Scharf. “Wells Fargo continues to have one of the strongest capital positions relative to regulatory minimums among the world’s financial services firms as demonstrated by our stress test results. These are certainly extremely challenging times for many and we remain committed to supporting our customers and communities, and we will continue to take appropriate measures to maintain strong capital and liquidity levels and to improve the earnings capacity of the company.”