Wells Fargo and U.S. Bancorp, the fifth- and sixth-largest U.S. banks, reported higher quarterly profits, helped by growth
in business lending and fee-generating units.
Profit rose 13% at Wells Fargo to $2.18 billion, or 64 cents per share, from $1.93 billion, or 57 cents per share, a year earlier, matching the average analyst forecast,
according to Reuters Estimates.
U.S. Bancorp said profit rose 4% to $1.19 billion, or 66 cents per share, from $1.14 billion, or 62 cents per share. Profit fell a penny per share below the average analyst forecast.
Both banks operate mainly in the western two-thirds of the United States. They have boosted their reliance on lending to small and mid-sized businesses after 17 Federal Reserve
interest-rate increases have slowed consumer borrowing growth. Wells Fargo has close to 3,200 branches, and U.S. Bancorp has 2,472.
"Growth is supported by the Western markets they serve, where commercial growth has been strong," said Gerard Cassidy, an analyst at RBC Capital Markets. "However, there is a clear
trend of credit quality deterioration compared with the third quarter."
Other large banks are scheduled to report results in the next week, including JPMorgan Chase on Wednesday, Citigroup on Friday, and Bank of America and Wachovia next Tuesday.
Wells Fargo, based in San Francisco, said revenue rose 11% to $9.41 billion, topping forecasts for $9 billion.
Compared with the third quarter, average loans and core low-cost deposits rose an annualized 11% and net interest margin rose to 4.93% from 4.79%.
Profit rose 9% in retail banking, 14% in business banking and 64% at Wells Fargo Financial, which lends to less credit-worthy people. Wells Fargo has been expanding in subprime lending while many rivals contract.
Wells Fargo set aside $726 million for credit losses, up 9% from the third quarter.
"Business overall was very good in the quarter as well as very balanced across all of our businesses," Howard Atkins, Wells' chief financial officer, told CNBC.
Despite weakness in the housing sector, Atkins told CNBC that Wells' mortgage business remains solid: the bank had $90 billion in mortgage applications during the quarter. That's "a very high number, and down only slightly from the third quarter," Atkins said. "People are still buying homes, they still need mortgage financing to buy their homes, and number two, refinancing activity has picked up in part because of the flat yield curve."
The bank said it sold an average 5.2 products to each retail customer and six products to each business customer, up from about three each when Norwest Corp. merged with Wells
Fargo in 1998.
Separately, it sold its Latin American consumer finance unit to a Bear Stearns private equity arm for an undisclosed price.
Atkins told CNBC that the bank continues to be interested in making "fill-in" acqusitions within its existing footprint.
"That allows us to bring our very broad product set to the customers we acquire," he said.
US BANCORP, OTHERS
U.S. Bancorp, based in Minneapolis, said net revenue rose 3% to $3.42 billion, though expenses rose 10%.
Acquisitions helped fuel a 12% increase in fee income, including gains of 26% in merchant processing services and 24% in trust and investment management. This more than offset a 5% drop in lending income and 77% drop in mortgage banking revenue.
Credit losses rose 25% from the third quarter to $169 million, and nonperforming assets edged up 2%.
Net interest margin held steady at 3.56%.
Results were the first reported by Chief Executive Richard Davis, promoted last month to replace Jerry Grundhofer, who remains chairman.
Davis said nonperforming asset levels should stay "fairly stable" despite "stress" from consumer borrowers in the Midwest.
Among other banks to report, Milwaukee-based Marshall & Ilsley said quarterly profit rose 16% to $205.4 million, or 79 cents per share. Commerce Bancorp , of Cherry Hill, N.J., said profit rose 68% to $78.7 million, or 40 cents per share.