Wells Fargo (WFC) CFO Howard Atkins said management was “very pleased” with financial performance. The San Francisco-based bank reported 2nd quarter earnings on Wednesday that were well above Wall Street’s earnings expectations.
Revenue came in precisely in line with forecasts.
“While economic recovery in the U.S. and abroad remained uneven, Wells Fargo earned record net income,” observed Atkins.
The bank reported net income of $3.1 billion, or 55 cents per share. The result was 20% above the previous quarter, but a 3% drop from year-ago profits when the mortgage business was booming. Analysts had forecast 48 cents per share, according to Thomson Reuters.
Wells’ revenue came in at $21.4 billion, precisely in line with the average Wall Street estimate, but down slightly from the previous quarter and $1 billion shy of the year-ago period.
Wells Fargo is the No. 1 small-business lender and No. 1 mortgage servicer in the country, with the largest branch network. It also inherited a huge retail-brokerage force with its Wachovia acquisition, and kept certain parts of its investment-banking business.
However, the housing market continued to weigh on results, as well as weak demand for business loans. A report from the Mortgage Bankers Association on Tuesday showed that servicer profits declined 44% during the first quarter — which was still seen as a strong period — and things appear to have gotten worse since then.
An extended period of low interest rates means the hedging strategy Wells Fargo has used to boost results may have faltered if management wasn’t nimble enough to keep up with the trends.
Finally, Wells Fargo will face elevated costs because of a decision to axe its consumer-finance business, as well as ongoing costs from the Wachovia integration.
CEO John Stumpf also commented on the financial reform bill, which has concerned investors even more after Bank of America (BAC) outlined billions of dollars’ worth of related costs last week. Stumpf wasn’t as specific as Bank of America CEO Brian Moynihan, but generally said Wells Fargo would manage through whatever results from the Dodd-Frank reform bill.
“[W]e support the general principles inherent in the financial reform bill, as they are consistent with how Wells Fargo operates,” he said in a statement. “We remain concerned that some aspects of regulatory reform may have unintended negative impacts for America’s financial system, consumers and businesses.”
In pre-market trading Wells Fargo shares were up 3.6% at $26.84.
Wells Fargo’s results were the latest in a string of mostly better-than-expected results from the financial sector. Rivals JPMorgan Chase (JPM), which raked in $4.8 billion last quarter, and Bank of America, which earned $3.1 billion, and Citigroup (C), which posted a $2.7 billion profit, beat forecasts and said that results were helped by improvement in consumer lending businesses.
