Wells Fargo’s Profit Up 13%
Gains in mortgage and business lending boosted Wells Fargo & Co.’s profit by 13% in the third quarter, overcoming losses from Hurricane Katrina and a surge in consumer bankruptcies, the San Francisco-based bank said Tuesday.
Wells Fargo, the largest bank based in California, said it earned $1.98 billion, or $1.16 a share, up from $1.75 billion, or $1.02, in the third quarter of 2004. Revenue jumped 16% to $8.5 billion from $7.3 billion.
Income from both lending operations and fees increased, with nearly every line of business recording double-digit gains, Chief Financial Officer Howard Atkins said.
Wells Fargo Home Mortgage revenue jumped $487 million to $1.4 billion, including a $356-million gain in the value that Wells put on its mortgage servicing rights, which benefited from rising interest rates.
Operating profit rose 22% to $1.49 billion in Wells Fargo’s retail banking division, which includes its individual and small-business customers.
Profit at the wholesale banking unit, whose customers are larger businesses, rose 12% to $407 million.
But Wells Fargo Financial -- the company’s so-called sub-prime mortgage unit that serves customers with poor credit or other financial issues -- saw its profit drop by 53% to $79 million. The company said that was largely because the division set aside $100 million to cover loans it expected to go bad because of Katrina.
Like other banks, Wells Fargo felt the effect of increased bankruptcies during the quarter, as consumers under financial pressure rushed to complete their filings before tougher bankruptcy rules took effect this week. The company charged off $541 million in debt as uncollectable, compared with $407 million a year earlier.
However, the effect was less than at some of Wells Fargo’s competitors, because the bank offers credit cards only as a service to its customers and not as a product line to be marketed separately across the country, Atkins noted in an interview.
In a down day on Wall Street, Wells Fargo shares slipped 24 cents to $58.90.
