Wells, BofA Post Higher Profits
Wells Fargo & Co. and Bank of America Corp. reported higher fourth-quarter earnings Tuesday, with rising deposits, home equity lending, commercial loans and credit card balances having helped offset declines in home mortgages.
At San Francisco-based Wells Fargo, the largest bank based in California, the “whole consumer complex” of businesses recorded double-digit gains, Chief Financial Officer Howard Atkins said. He cited home equity lending, up 39%, as a standout.
Investors are worried that competition for mortgages has become so intense that big players such as Wells, BofA and Countrywide Financial Corp. in Calabasas are not only making fewer home loans but also recording far lower profit each time they make or sell a loan, said Piper Jaffray senior analyst Robert P. Napoli.
But he said the firm’s research showed that those fears might be overblown. “The mortgage origination industry has remained rational on pricing,” Napoli said, adding that it was “possible that the pricing environment has actually improved” in recent months.
Wells said its other businesses were encouraging, with consumer finance, credit card and debit card operations all showing gains in the 12% range. Wells now provides an average of 4.6 financial products to each consumer, the bank said, up from three products in 1998.
Commercial lending, which for several years had stagnated at Wells and many other banks, grew for the third straight quarter and was accelerating, Atkins said.
Wells Fargo said its overall profit rose 10% to $1.79 billion, or $1.04 a share, compared with $1.62 billion, or 95 cents a share, a year earlier. Revenue also rose 10%, to $8.2 billion.
Total loans were 19% higher on average than in the last quarter of 2003, and income from fees rose by 9%.
On Tuesday, Wells Fargo’s shares rose 77 cents to $61.46 on the New York Stock Exchange.
Wells’ mortgage subsidiary, which rode the home-refinancing boom to an industry record $470 billion in home loans in 2003, saw its lending for home purchases and refinancings drop by 37%, to $298 billion, in 2004.
But the bank’s mortgage servicing operation, which earn fees for billing and collecting payments, saw its portfolio grow 13% during the year, to $805 billion.
For the full year, Wells earned $7 billion, or $4.09 a share, on revenue of $30 billion, up from a profit in 2003 of $6.2 billion, or $3.65 a share, on revenue of $28.4 billion.
As for Bank of America, its acquisition of FleetBoston Financial Corp. was reflected Tuesday in its fourth-quarter numbers. The Charlotte, N.C.-based bank reported earnings of $3.85 billion, or 94 cents a share, up 41% from $2.73 billion, or 92 cents a share, in the last quarter of 2003.
Revenue was up 42% to $13.9 billion. BofA shares rose 84 cents to $45.73 on the NYSE.
Bank of America said its integration of FleetBoston -- which it acquired in April in a $47-billion stock swap -- was on schedule. Kenneth D. Lewis, the bank’s president and chief executive, said the deal had cut costs and boosted profit as billed.
The bank, formerly based in San Francisco, said consumer accounts, deposit and card balances, credit and debit card purchase transaction volumes, trading, investment banking and assets under management all registered growth.
BofA said it added 2.1 million consumer checking accounts in 2004, along with 2.6 million consumer savings accounts and 5.6 million consumer credit card accounts.
For the year, Bank of America’s net income rose 31% to $14.1 billion, or $3.69 a share, up from $10.8 billion, or $3.57 a share, in 2003. Revenue grew from $38.6 billion to $49.6 billion.
Growth in fees also boosted fourth-quarter profit at US Bancorp in Minneapolis. It earned $1.06 billion, or 56 cents a share, up from $977 million, or 50 cents.
Cleveland’s National City Corp. earned $960 million, or $1.46 a share, up from $544 million, or 88 cents.
