SAN FRANCISCO – Wells Fargo &Co. fattened its profit margins and pocketed more customer service fees to boost its fourth-quarter earnings 13 percent, while U.S. Bancorp lowered its problem loans and expenses to eke out a more-modest improvement.
The results released Tuesday provided investors with their first look at how the nation’s biggest banks fared during the final three months of 2006 – a period in which the U.S. economy continued to expand despite jitters over crumbling home sales and weakening property values in many parts of the country.
Still, credit losses increased at both banks in the fourth quarter, suggesting that more borrowers were struggling to pay their bills.
At Wells Fargo, the deepening real estate slump pinched mortgage revenue, but the nation’s fifth largest bank overcame the slowdown by plumbing other financial pipelines to post a fourth-quarter profit of $2.18 billion, or 64 cents per share. That compared with net income of $1.93 billion, or 57 cents per share, a year earlier.
The earnings matched the average estimate of analysts surveyed by Thomson Financial.
Revenue for the period totaled $9.41 billion to easily surpass the average analyst estimate of $8.96 billion, according to Thomson Financial. The fourth-quarter revenue represented an 11 percent increase from the previous year.
Wells Fargo shares climbed 72 cents, or 2 percent, to close at $36.23 on the New York Stock Exchange.
Profit for the year was $8.48 billion, an 11 percent increase from $7.67 billion in 2005. Revenue for the year increased 8 percent to $35.7 billion.
Analyst Jim Bradshaw of D.A. Davidson doesn’t envision Wells Fargo’s growth tapering off any time soon. In a note issued Tuesday, he predicted the bank’s earnings will rise by 11 percent this year and 12 percent next year.
U.S. Bancorp, the nation’s seventh largest financial institution, earned $1.19 billion, or 66 cents per share, in the fourth quarter. That represented a 4 percent increase from net income of $1.14 billion, or 62 cents per share.
Revenue was $3.42 billion, a 3 percent increase from $3.33 billion in the previous year.
Although the earnings fell a penny below analyst projections, U.S. Bancorp shares gained 20 cents, 0.6 percent, to $35.75 on the NYSE.
U.S. Bancorp benefited from a decline in delinquent debt as the Minneapolis-based bank wrote off $169 million in bad loans during the fourth quarter, down from $213 million in the previous year.
The bank cited tougher bankruptcy laws that have made it harder for consumers to go to court and be excused from debt.
Wells Fargo so far has been able to avoid significant loan problems even as it has been grabbing a bigger piece of its customers’ wallets by relentlessly pitching more loans, credit cards and other financial services to households and businesses who already have accounts with the bank.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
