Wells Fargo & Co. became the last of the nation's biggest financial institutions to slash its dividend as the economy's woes worsen, reducing the quarterly payout 85%.
Meanwhile, Chief Financial Officer Howard Atkins announced another $2 billion in cost cuts for 2009 while Wells Fargo had "strong operating results" in January and February amid "continued growth in lending, deposits and mortgage volumes." Mortgage originations for the two months of $59 billion topped the "exceptionally strong" figures from all of the fourth quarter.
Shares rose 5.7% in premarket trading to $8.68. The stock through Thursday was down 72% this year.
The dividend cut to 5 cents a share from 34 cents per share will save the banking giant, which at year's end acquired Wachovia, some $5 billion a year. It follows a series of payout cuts started by JPMorgan Chase & Co. as executives are feeling pressure to reconsider their dividend defense as stock prices fall and the market puts a greater premium on capital preservation.
But some had been calling for Wells Fargo to cut its dividend in the wake of purchasing Wachova, which was forced to sell out amid a mountain of bad loans. Wells Fargo, which received $25 billion from the government last year and raised an additional $13 billion in a share offering, had resisted such a dividend cut.
Although doing so was "very difficult," President and Chief Executive John Stumpf said Friday the move was "absolutely right for our company and our shareholders because it will further strengthen our ability to grow market share and to continue our long track record of profitable growth." A more-normal dividend will return "as soon as practical."