By Saabira Chaudhuri
Wells Fargo & Co. reported a 1.8% rise in fourth-quarter net
income as the bank posted stronger loan growth, overshadowing a
rise in expenses.
Revenue beat the expectations of analysts polled by Thomson
Reuters.
The bank reported net income of $5.71 billion, compared with
year-earlier income of $5.61 billion. Per-share earnings,
reflecting the payment of preferred dividends, edged up to $1.02
from $1 a year earlier.
Revenue increased 3.8% to $21.44 billion. Analysts polled by
Thomson Reuters expected per-share earnings of $1.02 on revenue of
$21.23 billion.
Wells Fargo, run by Chairman and CEO John Stumpf, has been a
stock-market favorite among big banks in recent years. The most
valuable U.S. bank by market value, Wells Fargo has ridden the
recovery in the U.S. economy to 18 straight quarters of
year-over-year profit growth through 2014, according to
FactSet.
Lending remained a bright spot for Wells Fargo. Total loans grew
4.9% from a year ago to $862.55 billion.
Chief Financial Officer John Shrewsberry on Wednesday pointed to
the bank's strong net interest income, helped by loan growth, while
adding that fee income remained solid.
Wells Fargo reported its home lending originations amounted to
$44 billion, compared with the $50 billion a year earlier and $48
billion in the prior quarter. Mortgage banking noninterest income
totaled $1.52 billion, down 3.5% from a year earlier.
Wells Fargo's mortgage banking results are closely watched,
since as the largest U.S. mortgage lender the bank is viewed as a
bellwether for the U.S. housing market. A slump in refinancing in
recent quarters has outweighed any gains in new purchases, although
analysts at Jefferies recently noted that refinancing activity has
spiked, while so-called gain-on-sale margins--or the revenue a bank
books divided by the value of mortgages originated--have
climbed.
Wells Fargo's net interest margin--a key profitability figure
that measures the difference between what a bank makes on lending
and what it pays depositors--again narrowed, to 3.04% from 3.27% a
year earlier and 3.06% in the prior quarter. Wells Fargo has seen
the margin squeezed for several quarters now, as deposit growth
outstrips its loan growth.
The fourth-biggest U.S. bank by assets, Wells Fargo is viewed by
many analysts as a conservative institution that didn't get swept
up with as many excesses of the previous bubble era and the
regulatory scrutiny that has plagued banks with significant
investment banking and trading businesses, although it is still on
the hook for mortgage litigation.
During the quarter, Wells Fargo saw expenses move higher.
Noninterest expense rose 4.7% from a year earlier to $12.65
billion.
Wells Fargo lost the tailwind in had previously seen from
improving credit quality on its loan books. Reserve releases fell
to $250 million from $600 million a year earlier and $300 million
in the prior quarter. Banks generally release reserves as credit
conditions improve and they perceive less need to hold reserves
against potential loan losses.
Meanwhile, Wells Fargo's credit-loss provisions ticked up to
$485 million, compared with $363 million a year earlier and $368
million in the prior quarter.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
Access Investor Kit for Wells Fargo & Co.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US9497461015
Subscribe to WSJ: http://online.wsj.com?mod=djnwires