Wells Fargo & Co. on Tuesday reported a second-quarter loss after taking $1.16 billion in charges, mainly tied to venture capital losses in technology and telecommunications investments.
The San Francisco-based bank had a loss of $87 million, or 5 cents a share, compared with earnings of $1.04 billion, or 61 cents a share, in the second quarter of 2000.
Wells Fargo joins other U.S. banks, including J.P. Morgan Chase & Co., that face losses from venture capital investments. J.P. Morgan last month said second-quarter revenue from venture capital is likely to fall after it was forced to write off investments as bankruptcies increased. Most of Wells Fargo's portfolio loss is from the declining value of shares it owned in Redback Networks Inc. and Cisco Systems Inc.
"They had really strong core revenue growth in the quarter," said Lisa Welch, an analyst at John Hancock Advisors Inc., which holds 5.3 million shares of Wells Fargo stock. "I view the loss as a one-time thing."
Shares of Wells Fargo rose $1.47 to close at $47.50 on the New York Stock Exchange.
Wells took another charge of $70 million, or 4 cents a share, in auto finance losses related to Wells' October 2000 acquisition of First Security Corp. Some of the charge covered declining values of used cars that customers returned to the lender after their leases expired.
Chief Executive Richard Kovacevich said the company's "revenue growth engine is running very smoothly" excluding the charges.
The second-quarter charge amounted to 67 cents a share. The company told investors June 6 that it would take a charge. Net interest income, or what the bank makes from lending, rose to $3 billion from $2.7 billion in the year earlier quarter on a fully taxable basis.
Non-interest income, what the bank makes from fees, fell to $547 million from $2.1 billion in the second quarter last year.
Wells Fargo said it set aside $427 million in the second quarter to guard against possible loan losses in future quarters, up from $275 million set aside a year ago.
Among other California banks, Los Angeles-based City National Corp., the parent of City National Bank, reported a record second-quarter net income of $36.3 million, or 74 cents per share, compared with $33.4 million, or 69 cents, a year ago. Net interest income rose 1% to $108.4 million.
City National shares rose $2.24 to close at $44.25 on the NYSE.
Golden State Bancorp Inc., the San Francisco-based parent of California Federal Bank, reported second-quarter earnings of $104.2 million, or 72 cents per share, compared with $87.6 million, or 61 cents, a year ago. Net interest income rose 16% to $290.3 million.
Golden State shares rose 70 cents to close at $33 on the NYSE.