Wells Fargo Reports 3rd Quarter Profit

Published by: Mike Goldman on 20th Oct 2010 | View all blogs by Mike Goldman


Wells Fargo Reports 3rd Quarter Profit

Wells Fargo, in its third-quarter earnings report released on Wednesday, far out-paced analysts' expectations, thanks in large part to the company's efforts to trim expenses.

Wells reportedly earned $3.34 billion from July to September on revenue of $20.87 billion, with $3.15 billion, or 60 cents per share applicable to shareholders.  Analysts responding to a recent survey conducted by Thomson-Reuters had forecast an average of 55 cents per share on revenue of $20.95 billion.  Profits for the bank were up 9 percent from the previous quarter and 3 percent from the third quarter of 2009.  Revenue, meanwhile, declined 2 percent from the prior period and 7 percent from the same period a year ago.

Shares of the San Francisco-headquartered firm fell by 1.6 percent in pre-market trading to $24.16.

A portion of Well Fargo's increased profits came from $650 million in “reserve releasing”, or letting go of excess capital held against bad loans that are out-performing expectations.  Insiders also cited strong deposit growth and a slight improvement in loan demand as reasons for the positive numbers, though the firm's overall loan portfolio is still in a state of decline.  The firm unloaded $6.2 billion worth of risky, high-yield loans in the quarter.

As the bank continued efforts to replace those assets, most of which were acquired in the merger with Wachovia, the near-record-low interest rates have made it hard to generate income.  The bank's net interest income, or the difference between its borrowing rates and the rates it charges on loans extended, dropped $300 million from the previous quarter.

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