Wells Fargo slashes dividend, expects $5B savings

Following the lead of other major banks, Wells Fargo & Co. said Friday it will slash its dividend by 85% to shore up its capital base.

The bank, which is still digesting the acquisition of Wachovia Corp., said cutting its quarterly payout from 34 cents to 5 cents a share would result in $5 billion in annual savings.

Wells Fargo also disclosed improved mortgage lending figures for the first two months of the year and said it hoped to pay back $25 billion in government rescue funds as soon as possible.

It also said it had identified ways to save an additional $2 billion a year.

Investors welcomed the news from San Francisco-based Wells, sending its shares up 49 cents, or 6%, to close at $8.61 despite a broad decline in other financial shares.

Banks are traditionally regarded as steady dividend payers, and the market has punished shares of other banks that slashed their own payouts recently, including JPMorgan Chase & Co. and U.S. Bancorp.

Wells Fargo has long been considered one of the stronger banks in the industry but has faced increased scrutiny from analysts and investors who are worried about its financial stability.

Following initial injections of $25 billion into the nation’s top banks, including Wells Fargo, the government has had to pump billions more into Citigroup Inc. and Bank of America Corp.

Wells Fargo said it had increased lending, deposits and mortgage volumes in January and February.

Mortgage originations in those months totaled $59 billion while mortgage applications were $107 billion.

That’s on top of the $50 billion in new mortgage loans originated in the fourth quarter.

Wells Fargo said the integration of Wachovia’s operations is proceeding as planned and that the bank was on track to save $5 billion annually as a result of the deal.

Wells also said it expected total integration costs to be less than originally projected.

In another effort to save money, Wells has suspended bonuses for its senior executives.