U.S. News

Wells Fargo Fourth-Quarter Profits Rise 13% To 64 Cents a Share

Howard Atkins, CFO, Wells Fargo

Wells Fargo said fourth-quarter earnings rose 13%, helped by growth in consumer and business lending, including its fast-growing subprime mortgage unit.

The San Francisco bank said net income rose to $2.18 billion, or 64 cents a share, from $1.93 billion, or 57 cents a share, a year earlier.

Revenue rose 11% to $9.41 billion, topping forecasts for $9 billion. Average loans rose an annualized 11% from the prior quarter, and net interest margin also increased. Expenses also rose 11%, to $5.41 billion.

Profit rose 9% to $1.51 billion from retail banking, 14% to $508 million from wholesale business banking, and 64% to $161 million at Wells Fargo Financial, which lends to less creditworthy people.

Wells Fargo is increasing its subprime home lending business even as most competitors cut back as delinquencies mount and intensifying competition drives down margins.

By the third quarter, Wells Fargo had become the largest U.S. subprime lender, according to National Mortgage News. It is also the No. 2 overall mortgage lender, after Countrywide

The company announced on Tuesday it sold its Latin American consumer finance unit to a Bear Stearns' private equity arm for an undisclosed price.

In November, the company said it would acquire factoring company EFC Partners for an undisclosed amount.

Record Results

Fee income from mortgages rose 8% to $677 million. Applications rose 1% to $90 billion, and unclosed mortgages as of Dec. 31 fell 4% to $48 billion. New mortgages fell 23% to $87 billion.

Wells Fargo last year bought the rights to service $140 billion of mortgages from Washington Mutual, the largest U.S. savings and loan.

Net credit losses rose 3% to $726 million, and increased 36% excluding the year-earlier impact of bankruptcy law changes.

Net interest margin, the difference between what the bank earns on loans and pays on deposits, rose to 4.93% from 4.79% in the third quarter, when Wells Fargo sold many lower-yielding securities.

Loans rose 3% to $319.1 billion, core deposits rose 7% to $270.2 billion, and assets were little changed at $482 billion.

Billionaire Warren Buffett's holding company, Berkshire Hathaway, is Wells Fargo's largest
investor, owning 5.65% of its shares as of Sept. 30, according to Thomson ShareWatch.

Wells Fargo will provide a recorded review of the results, starting at 8:30 am, available over the phone and on its website.