Wells Fargo (WFC, Financial) and many other US banks struggled in the second quarter, weighed down by a combination of very low interest rates and an uncertain loan-loss environment as the economic disruption from Covid-19 continued to play out. Wells was particularly battered given widespread expectations that it would be forced to cut its dividend as a result of the Federal Reserve’s recently instituted cap on dividend payouts. While the path forward for Wells and other banks remains unclear, we are comfortable with the capital held by Wells Fargo and its likely ability to withstand very adverse scenarios.
From First Eagle Investment (Trades, Portfolio)'s Global Value Team second-quarter 2020 commentary.
