Wells Fargo profit surges 81%

Another bank comes to us through Wells Fargo whose $3.17bn income reported for the second quarter is a staggering 81% higher than last year, easily beating analysts’ expectations of $0.34.  This is equivalent to a diluted EPS of $0.57, 8% higher than last year’s.  The results include a $0.10 charge for building the credit reserve, $0.08 for the FDIC special assessment of $565m, and other merger-related and restructuring expenses of $244m or $0.03 a share.

With as much as 39% contribution from recently acquired Wachovia, consolidated revenues were up 28% to $22.5bn.  Strengths for the firm include its regional banking, commercial banking, mortgage banking, investment banking, asset-based lending, auto lending, and student lending to name some.

While credit reserves have increased to $23.5bn, the bank said that the allowance would last for approximately 12 months and that there are “inherent commercial and commercial real estate loan losses” to happen  within the next 24 months.

Wells Fargo were also more conservative in its investments with the allocation to higher-risk loan portfolios lower by $6.3bn while its trading assets were also reduced by about the same amount.

The integration of Wachovia into the business also is going smooth, after the re-branding of Wachovia brokerage, capital markets and insurance businesses have been successful. The company expects an annual savings of $5bn when the integration has been completed.

To its mortgage side of the business, Wells Fargo has helped about 750,000 people refinance their mortgages.

The firm also reported better ratios, with Tier 1 capital up by more than 100 basis points from last quarter – 9.80% vs. 8.30% while its TCE jumped from 3.84 to 5.24 in Q2.

The full earnings report can be found HERE (PDF).


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