Wells’ Profit Falls 9.7%; Upturn Seen
Wells Fargo & Co. on Tuesday said third-quarter earnings fell 9.7%, though the bank said it may have finally stemmed the loss of customers and revenue following its problem-plagued takeover of First Interstate Bancorp last year.
The nation’s 10th-largest bank said third-quarter net income fell to $290 million, or $3.26 a share, from $321 million, or $3.23, in the same period last year. The results exceeded the average estimate of about $3.20 a share.
Shares of San Francisco-based Wells Fargo surged $22.31, nearly 8%, to close at $314 on the New York Stock Exchange, as investors, beset with more than a year of earnings disappointments, responded to signs that the bank may have turned the corner. Wells also
announced plans to buy back up to 8.6 million shares, or about 10% of common shares outstanding.
Wells reported progress in two problem areas. It said loans and deposits started growing in September after more than a year of decline, a signal that revenue may be poised to expand. And the bank said credit card losses fell after a sharp jump in the previous quarter.
“The twin devils that have haunted them--runoff of customers following the First Interstate acquisition and credit card losses--improved in the quarter,” said analyst Jay Tejera of Dain Bosworth Inc. “Their situation appears to have stabilized.”
“This is the first quarter in six quarters that they equaled or beat the Street,” said analyst Raphael Soifer of Brown Bros., Harriman & Co. “The question now is how quickly things will recover.”
Wells Fargo Chairman Paul Hazen said the results indicate that the bank has begun to win new business after more than a year of struggling to integrate its purchase of First Interstate.
Per-share earnings increased because the company reduced the number of shares outstanding by 6.2 million shares, or 6.6% of the total, since last year. The bank bought back 1.5 million shares during the third quarter.
Despite what the bank said was the first evidence of stabilization, Wells loss of customers since its purchase of First Interstate has been severe. Total deposits dropped 15% to $70.9 billion while loans fell 6% to $63.3 billion in the year ended Sept. 30. As a result, net interest income fell 13% to $1.13 billion.
At a Glance:
El Segundo-based Mattel Inc. said its third-quarter earnings rose 23% from a year ago, boosted by strong sales of Barbie and Hot Wheels. The nation’s largest toy maker earned $223.7 million, or 75 cents per share, compared with $181.4 million, or 61 cents, a year ago. The 1997 results include an extraordinary charge of $4.6 million related to the redemption of senior subordinated notes.
Netscape Communications Corp., enjoying strong demand for its business software and services, reported a 53% gain in third-quarter profit. The Mountain View-based company earned $11.7 million, or 13 cents a share, compared with net income of $7.7 million, or 9 cents, for the same period of last year. The results slightly beat the estimate of 12 cents.
Avery Dennison Corp., based in Pasadena, reported third-quarter net income of $52.6 million, or 50 cents per fully diluted share, compared with $46.6 million, or 43 cents, in the year-ago quarter.
* MORE EARNINGS: D14
