Profits Climb at Big Banks

Large banking firms including San Francisco’s Wells Fargo & Co. and Oakland’s Golden West Financial Corp. reported strong first-quarter profits Tuesday, as consumer banking and credit card fees rose and bad loans declined.

The rosy results came despite rising rates on home loans, which have slowed refinancings. Wells Fargo, the nation’s fifth-largest bank and largest mortgage lender, said profit rose 18% to about $1.77 billion despite a one-third decline in mortgage origination fees.

Golden West, the nation’s second-largest savings and loan and parent of World Savings Bank, reported a profit of about $300 million, up 15%. It was helped by an increase in its specialty, adjustable-rate mortgages, which have cheaper initial payments than fixed-rate loans, attracting consumers when rising rates and home prices make purchases more difficult.

Chicago-based Bank One Corp., the No. 6 U.S. bank, recorded a 51% increase in net income to $1.2 billion. No. 7 U.S. Bancorp, based in Minneapolis, said first-quarter net income rose 14%, to $1 billion.

Nine of the 10 biggest U.S. banks -- including New York-based Citigroup Inc., the world’s biggest financial company in terms of assets, and Charlotte, N.C.-based Bank of America Corp., the biggest U.S. consumer bank -- have reported higher profits in the quarter, combining for a record $14.6 billion in net income.

Tax cuts and a rising stock market have encouraged consumer spending and borrowing, buoying bank revenue.

“We’re seeing good fee income at many of the banks, and that’s really helping,” said James Luke, a fund manager at BB&T; Asset Management in Raleigh, N.C., which owns shares of Wells Fargo and Bank One. “The consumer has done very well.”

The profit at Wells Fargo, the largest bank based in California, equaled $1.03 a share, up from $1.49 billion, or 88 cents, a year earlier. Revenue was $7.15 billion, a 7% improvement from the same quarter in 2003.

Wells Chief Financial Officer Howard Atkins noted signs of an economic pickup in the bank’s small-business lending, which was up 17% from a year earlier. More important, he said, was a 48% rise in loan commitments, reflecting rising demand for capital from existing and new customers.

The bank said defaulted loans and other nonperforming assets fell 30%, to 0.61% of its portfolio.

Wells Chairman Richard Kovacevich predicted that the bank would be able to sustain its earnings momentum -- it has reported record profit the last 11 quarters -- as the economy gathers steam.

“We’re well-positioned for even more growth,” he said.

Wells’ shares fell 55 cents to $55.36 on the New York Stock Exchange.

Golden West posted net income of $299.7 million, or $1.93 a share, compared with $260.1 million, or $1.67, a year earlier. Revenue rose 15% to $678 million.

Golden West Co-Chairman Herbert M. Sandler said first-quarter loan volume was 35% higher than in 2003, largely because of the draw of adjustable mortgages, which totaled 98% of originations, up from 91% a year ago. The thrift said its nonperforming assets fell to 0.48% of total assets, down from 0.63% in the first quarter of 2003.

Golden West shares fell 93 cents to $100.91 on the NYSE.