Wells Fargo shares fall for a second straight session on Tuesday, first-quarter profit shrinks considerably due to coronavirus-related provision build

Wells Fargo & Co’s (WFC) first-quarter earnings, reported on Tuesday, registered a sharp year-on-year drop, since the Wall Street bank set aside $3.83 billion in credit loss provisions as a result of the coronavirus pandemic. That compares with $845 million in provisions in the same quarter a year ago.

Wells Fargo shares closed lower for a second consecutive trading session in New York on Tuesday. The stock went down 3.98% ($1.25) to $30.18, after touching an intraday low at $29.58, or a price level not seen since April 8th ($28.68).

Shares of Wells Fargo & Company have retreated 43.90% so far in 2020 compared with an 11.91% loss for the benchmark index, S&P 500 (SPX).

In 2019, Wells Fargo & Co’s stock went up 16.75%, thus, it again underperformed the S&P 500, which registered a 28.88% gain.

Wells Fargo’s total revenue plunged 18% year-on-year to $17.7 billion during the quarter ended on March 31st, since the US banking industry is about to face the worst recession in decades.

Meanwhile, the bank reported a quarterly profit of only $42 million ($0.01 per share) compared with $5.51 billion ($1.20 per share) in the same period a year ago. Analysts on average had anticipated earnings of $0.33 per share.

“Our results were impacted by a $3.1 billion reserve build, which reflected the expected impact these unprecedented times could have on our customers,” John Shrewsberry, Wells Fargo’s Chief Financial Officer, said in a statement, cited by Reuters.

Analyst stock price forecast and recommendation

According to CNN Money, the 21 analysts, offering 12-month forecasts regarding Wells Fargo’s stock price, have a median target of $33.00 with a high estimate of $45.00 and a low estimate of $21.00. The median estimate represents a 9.34% upside compared to the closing price of $30.18 on April 14th.

The same media also reported that at least 18 out of 25 surveyed investment analysts had rated Wells Fargo’s stock as “Hold”, while 3 – as “Buy”. On the other hand, 4 analysts had recommended selling the stock.