Wells Fargo Reports 4% Increase in Profits, But Misses Targets

Wells Fargo released third-quarter earnings Tuesday, announcing a 4% increase in profits. Net income increased to $2.28 billion ($0.68/share) from $2.19 billion ($0.64/share) the same time last year. Revenues jumped 10% to $9.85 billion. Analysts expected earnings of $0.70/share on revenues of $10.02 billion. Though Well Fargo is the US's second-largest home lender, it managed to avoid the worse of the credit crisis by shutting down its subprime lending unit in July. "It's not that Wells Fargo isn't affected by the mortgage industry problems, but they are so well-capitalized and they seem to be managing their way through this market mess," said Keith Gumbinger, vice president of HSH Associates, a mortgage research firm. The company did writedown about $500 million for mortgages whose value had decreased. Still, it's easy to see it could have been much worse, as many mortgage lenders went under, or took extreme measures to ride out the subprime storm. "We maintained our conservative risk management practices, and our strong balance sheet and capital ratios, perhaps the strongest in the industry, which allowed us to continue to grow profitably despite the problems in the market," said CEO John Stumpf. In pre-market trading Tuesday, shares of Wells Fargo traded down 1.4% to $35.49.

Sources: Press Release, Bloomberg, Reuters
Commentary: Wells Fargo's Free Stock Trades Pressure Online Brokerages • Modeling Forward Defaults: Top Five US Banks
Stocks to watch: WFC. Competitors: CFC, BAC. ETFs: VFH
Earnings call transcript: Wells Fargo Q2 2007

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