Wells Fargo Posts 56% Rise in Profit

Wells Fargo & Co. said Tuesday that its second-quarter net income rose 56% from a year earlier after its $13.2-billion acquisition of First Interstate Bancorp in April, but earnings per share fell.

Other big banking companies reported stronger second-quarter earnings Tuesday, including Chase Manhattan and Citicorp.

Chase, which recently merged with Chemical Banking Corp. to form the nation’s No. 1 bank, said its profit rose 17%. While Chase’s bad credit-card debts rose, the increase was less than some analysts had feared.

Citicorp saw profit rise 12% in the quarter, despite lower profit from its credit-card operation, the biggest in the country.

San Francisco-based Wells Fargo said net income rose to $363 million, or $3.61 a share, from $222 million, or $4.51, a year earlier. Wells’ shares outstanding almost doubled because of the shares it issued to buy its Los Angeles-based rival.

The average forecast was for $4.11 a share, according to a survey of 14 analysts.

“The world in general will be disappointed,” said analyst Raphael Soifer of Brown Bros. Harriman & Co. “It’s below what the world was expecting.”

Wells Fargo put $7.2 billion of goodwill on its balance sheet to acquire First Interstate, representing the excess over First Interstate’s book value that Wells Fargo paid. That has to be written down over time, reducing Wells Fargo’s earnings.

The bank said its profit for the quarter before the goodwill write-down was $4.89 a share.

Wells Fargo said it had net charge-offs loans it wrote off, minus written-off loans that it recovered--of $178 million in the quarter, with $90 million of it coming from credit-card loans.

Chase’s profit was $856 million, or $1.80 per share, up from $729 million, or $1.54, a year ago. It beat estimates of $1.75 per share. Net charge-offs for credit card losses rose to $279 million from $207 million in the quarter, a little less than analysts had feared.

Second-quarter profits at Citicorp were $952 million, or $1.86 per share, compared to $853 million, or $1.76, a year earlier. Citicorp beat analysts’ expectations of a $1.79-per-share profit.

Also reporting Tuesday was H.F. Ahmanson, the parent of Home Savings of America. The Irwindale-based company said its second-quarter earnings rose 6.7%, helped by a lower tax rate.

Ahmanson, the biggest U.S. thrift, said net income rose in the quarter to $68.7 million, or 50 cents a share, from $64.4 million, or 43 cents, a year ago. It matched analysts’ expectations.