| Minneapolis Star Tribune | - |
Mortgage
machine stutters but profits rise 10 percent. Car loans and broker fees
are bright spots. hide. Wells Fargo's fourth quarter profit showed the
banking company, one of the largest in Minnesota, is adjusting to an
environment with less mortgage ...
Wells Fargo: finding new normal
- Article by: JENNIFER BJORHUS , Star Tribune
- Updated: January 14, 2014 - 3:23 PM
Mortgage machine stutters but profits rise 10 percent. Car loans and broker fees are bright spots.
Wells Fargo's fourth quarter profit
showed the banking company, one of the largest in Minnesota, is
adjusting to an environment with less mortgage refinancing business.
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Cutting costs, dipping into funds set aside for future bad loans and broad-based loan growth helped push Wells Fargo & Co. to a strong finish for 2013, offsetting the hit the bank is taking from the slowdown in mortgage refinancing.
The San Francisco-based lender had net
profit of $5.6 billion in the fourth quarter, or $1 per share, up 10
percent from a year ago. It beat analysts’ per-share estimate by two
cents.
Wells Fargo clung to the double-digit
profit growth it’s known for, but the wow-y results it enjoyed during
the mortgage refi bonanza of the past few years have given way to
something more normal.
Loan demand is now humdrum. The $50
billion in new mortgages Wells Fargo made in the last three months of
2013 was the bank’s lowest level in years. Its total revenue of $20.7
billion, while up slightly from the previous quarter, was off 6 percent
from a year earlier.
Fueling profit growth were strong gains in
areas such as investment securities; trust and investment fees, which
includes Wells Fargo’s large brokerage business; and card fees. The bank
also curbed expenses, partly through the 5,300 full-time job cuts in
mortgage production it made during the third quarter.
Wellscontinues to experience steady
overall consumer and corporate loan growth. Car loans rose 26 percent
from a year ago to $6.8 billion.
Plus, the bank released a substantial $600
million from the reserves it holds to cover future bad loans, citing
improving credit quality. The money counted directly as income.
Wells Fargo CEO John Stumpf said he
doesn’t see 2014 as a breakout year for loan demand or the economy, but
told analysts he expects “steady improvement.”
Normal appeared good enough for investors.
It looked particularly good next to JPMorgan Chase & Co., which
kicked off bank earnings Tuesday with Wells Fargo but saw profits drop 7
percent from a year earlier.
Wells Fargo shares, which dipped Tuesday
morning after the news was announced, were flat by mid-afternoon,
trading around $45.60 .
In a CNBC interview, veteran industry analyst Dick Bove called the bank’s quarter “superb.”
“I think the stock should be bought and I
think the problem that people are having with Wells Fargo is they can’t
seem to divorce the company’s relationship to the housing market to look
at the whole company,” Bove said.
Jennifer Bjorhus • 612-673-4683
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