Wells Fargo reports 20% boost in profit
Wells Fargo & Co. reported fourth-quarter profit rose 20%, fueled by strong returns from the San Francisco bank’s mortgage business.
The bank said robust loan growth from consumers and businesses helped it top Wall Street projections. Profit rose to $4.1 billion, or 73 cents a share, on $20.6 billion of revenue.
The results demonstrate that Wells Fargo is able to grow its loan portfolio and overall revenue despite the sluggish economy and continued global financial turmoil. Other major U.S. banks haven’t been so lucky, with Citigroup Inc. on Tuesday posting an 11% drop in profit.
“The biggest challenge everybody has is the economy, and we can’t change that,” Chief Financial Officer Tim Sloan said in an interview. “We focus on what we can control, and this quarter shows how our diversified model is not dependent on any one business.”
By contrast, Citi experienced weakness in its investment banking operations. The drop wasn’t a surprise and underscores how turbulent financial markets have affected banks with big Wall Street sales and trading operations.
Citi posted a profit of $1.16 billion, or 38 cents a share, on $18.4 billion in revenue.
JPMorgan Chase & Co., one of the biggest players on Wall Street, reported last week that its profit fell 23% during the quarter. Investment banking revenue at the company fell 30%.
Wells Fargo, by contrast, is more focused on consumer businesses. This includes mortgage lending, which was a major cause of concern during the housing meltdown that led to the financial crisis.
Analysts scrutinized Wells Fargo for wrong-way mortgage loans it inherited after acquiring Wachovia Corp. in 2008. The Charlotte, N.C., bank had nearly collapsed over troubled commercial and residential loans on its books, many stemming from its acquisition of Golden West Financial Corp.
But the amount of money Wells Fargo set aside to cover future losses on loans was down in the fourth quarter, and write-offs of uncollectable loans fell. In addition, nonperforming assets — the industry’s term for soured loans and other dud investments on a bank’s balance sheet — declined 20%.
Wells Fargo said revenue from community banking, which includes branches and mortgages, was up 30% year over year.
Analysts at investment bank Keefe, Bruyette & Woods said Wells Fargo’s profit margin on lending beat their expectations and those of Wall Street overall, “and mortgage banking was much stronger [than expected].”
