Wells Fargo,the fifth-largest U.S. bank, said Wednesday quarterly profit declined 11 percent, but results topped forecasts as solid revenue gains and lower expenses helped offset a big jump in bad loans.
The results suggest that the company, which is also the second-largest U.S. mortgage lender but tries to lend conservatively, is still navigating the global credit crisis more effectively than many rivals. Shares soared $2.09, or 7.5 percent, to $29.90 in pre-market electronic trading.
First-quarter net income for the San Francisco-based company fell to $2 billion, or 60 cents per share, from $2.24 billion, or 66 cents, a year earlier.
Revenue increased 12 percent to $10.56 billion, while expenses dropped 1 percent to $5.46 billion.
Analysts on average forecast profit of 57 cents per share on revenue of $10.4 billion, according to Reuters Estimates.
"Despite a weakening economy, the continued downturn in housing and expected higher charge-offs, this was a remarkably strong quarter," Chief Executive John Stumpf said.
Average loans grew 19 percent and core deposits increased 9 percent, while net interest margin, already one of the industry's best, expanded.
The growth helped offset $2.03 billion set aside for credit losses, nearly triple the $715 million a year earlier. Net charge-offs more than doubled to $1.53 billion.
Results improved from the fourth quarter, when a write-down for home equity loans limited profit to $1.36 billion.
Billionaire Warren Buffett's Berkshire Hathaway is Wells Fargo's largest investor, owning 8.8 percent of its stock at year end, Thomson ShareWatch said.
Also on Wednesday, JPMorgan Chase said profit fell 50 percent as it suffered more than $5 billion of write-downs and credit losses.
Mortgage Applications Surge
At Wells Fargo, profit fell 5 percent to $1.43 billion from retail banking, fell 25 percent to $475 million in wholesale business banking, and fell 13 percent at Wells Fargo Financial, which lends to less creditworthy people.
Mortgage lending totaled $66 billion, down from $68 billion a year earlier.
Applications rose 17 percent to $132 billion, and soared 45 percent from the fourth quarter. This growth suggests that Wells Fargo may be winning market share as weaker rivals cut back or stop lending.
Net interest margin fell to 4.69 percent from 4.95 percent a year earlier, but rose from the fourth quarter's 4.62 percent.
Wells Fargo said it has about 3,296 branches in 23 U.S. states, and $595.2 billion in assets.
Wells Fargo shares closed Tuesday at $27.81 on the New York Stock Exchange. The shares have fallen 8 percent this year, compared with a 14 percent drop in the Philadelphia KBW Bank Index.