Wells Fargo lost $2.4 billion last quarter, setting the stage for its first dividend cut since the Great Recession

Photo | Contributed A Wells Fargo branch.

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By Matt Egan, CNN Business

Wells Fargo swung to its first quarterly loss since the Great Recession, forcing the struggling bank to warn it will likely slash its coveted dividend by 80%.

The poor results were driven by soaring expenses linked to Wells Fargo's scandals and surging credit costs caused by the bank's darkening economic view.

Wells Fargo suffered a loss of $2.4 billion during the second quarter, a sharp reversal from the $6.2 billion the lender earned a year ago. The bank lost 66 cents per share, more than three times as much as feared. It's Wells Fargo's first loss since late 2008 during the height of the financial crisis.

Revenue dropped by a steeper-than-expected 18% to $17.8 billion.

Wells Fargo said it expects to cut its dividend to just 10 cents a share, subject to board approval. That would make Wells Fargo the first major bank to do so, underscoring the fragile state the company entered the crisis. This marks a reversal from the Great Recession, when Wells Fargo, in 2009, was among the last of the big banks to cut its dividend because of its relative strength.

Charlie Scharf, Wells Fargo's CEO, said in a statement the bank is "extremely disappointed" in both its results and the expected sharp dividend cut.

Investors were also concerned by the move. Wells Fargo's stock dropped 3% in premarket trading. The stock has lost more than half of its value so far this year.

Worries about the economy forced Wells Fargo to ramp up its allowance for credit losses for loans by $8.4 billion from the first quarter. Much of that was driven by commercial and residential real estate loans.

"Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter," Scharf said," which drove the $8.4 billion addition to our credit loss reserve in the second quarter."

A pedestrian wearing a protective mask walks past a boarded up Wells Fargo & Co. bank branch in Washington, D.C., U.S., on Thursday, June 4, 2020. Mayor Muriel Bowser lifted the curfew in D.C. for Thursday, the Washington Post reported.