Wachovia Profit Up 33%, Aided By Acquisition, Cost Controls

Wachovia, the fourth-largest U.S. bank, on Monday said first-quarter profit rose 33%, as commercial lending growth and the acquisition of Golden West Financial helped offset thinner margins and higher credit losses.

Net income for the Charlotte, North Carolina-based company rose to $2.3 billion, or $1.20 a share, from $1.73 billion, or $1.09 a share, a year earlier.

Excluding merger costs, profit rose to $2.31 billion, or $1.20 a share, from $1.77 billion, or $1.12, a year earlier.

Analysts on average expected profit of $1.16 a share, according to Reuters Estimates.

Revenue on a taxable equivalent basis rose 17% to $8.24 billion. Non-interest expense rose 8% to $4.59 billion. Compared with the fourth quarter, profit was roughly unchanged, while revenue fell about 4%, Wachovia said.

Results benefited from a 10% increase in average commercial loans, which helped drive a 27% increase in lending income. Consumer loan growth also rose, though this was largely from acquisitions.

This helped offset a decline in net interest margin to 3.01% from the fourth quarter's 3.09%, and 3.21% percent a year earlier. The bank also set aside $175 million for loan losses, triple the year-earlier amount.

Results included Golden West, an adjustable-rate mortgage lender and 285-branch thrift that Wachovia acquired on Oct. 1 for $24.2 billion.

Like many rivals, the former Golden West has been reporting declining mortgage originations and increasing delinquencies as the U.S. housing market slows.

Ken Thompson, Wachovia's chief executive, nevertheless said the integration of Golden West remains "on track."

Wachovia shares closed Friday at $54.00 on the New York Stock Exchange. The shares have fallen 5% this year, compared with a 4% decline in the Philadelphia KBW Bank Index.

Consumer and Business Banking Grows

Adding Golden West helped boost consumer and business banking profit 41% to $1.54 billion.

Profit in corporate and investment banking fell 23% to $379 million. Earnings rose 42% to $304 million in capital management and 11% to $65 million in wealth management.

Wachovia expects 2007 growth in consumer loans by a mid-single-digit percentage and commercial loans by a low double-digit percentage, reversing its forecast in January.

Net charge-offs rose to $155 million from $59 million. Assets rose 30% to $706.4 billion.