Wells Fargo Quarterly Profit Rises 11%, Tops Forecasts
Wells Fargo , the fifth-largest U.S. bank, said first-quarter profit rose 11%, as loan growth and higher net interest margin offset rising credit losses.
Net income for the San Francisco-based company rose to a record $2.24 billion, or 66 cents a share, from $2.02 billion, or 60 cents, a year earlier.
Analysts on average forecast profit of 65 cents a share, according to Thomson Financial.
Revenue rose 10% to $9.44 billion, topping forecasts for $9.31 billion, while operating expenses rose 9% to $5.53 billion. Average loans grew 3% from a year earlier.
Wells Fargo, the No. 2 U.S. mortgage lender, has so far not been hit as hard as many rivals by the slowing housing market.
Although it makes riskier "subprime" loans, it does not make some loans that have proved troublesome, and passes off the credit risks on some loans to investment banking partners.
Fee income from mortgage banking rose 90% to $790 million, Wells Fargo said. Applications rose 19% to $113 billion, and new mortgages rose 3% to $68 billion.
Net credit losses rose 65% to $715 million from a "historically low" $433 million a year earlier, but fell from the fourth quarter's $726 million.
Chief Credit Officer Mike Loughlin said home equity losses are rising, and the bank expects "higher-but-manageable losses" throughout 2007 in that portfolio.
Net interest margin, meanwhile, rose to 4.95 percent from 4.93% in the fourth quarter and 4.85 percent a year earlier.
Wells Fargo shares closed Monday at $35.51 on the New York Stock Exchange. The shares are little changed this year, compared with a 2% decline in the Philadelphia KBW Bank Index.
Profit rose 27% to $1.53 billion from retail banking and 13% to $598 million from wholesale business banking.
At Wells Fargo Financial, which lends to less creditworthy people, profit fell 59% to $114 million because of higher credit losses and a year-earlier gain from the sale of a Puerto Rico lending unit.
Loans rose 6% to $325.5 billion, core deposits rose 13% to $296.5 billion, and assets fell 1% to
Billionaire Warren Buffett's Berkshire Hathaway has been Wells Fargo's largest investor, owning 7% of its shares as of Dec. 31, according to Thomson ShareWatch.