Wells Fargo, the most profitable US bank in 2013, posted a 14 per cent rise in first-quarter earnings as fewer customers missed loan payments.
Net income advanced to $5.89 billion, or $1.05 a share, from $5.17 billion, a year earlier. It marked the 12th consecutive record quarter. While the results beat Wall Street estimates, revenue fell 3 per cent and profit was down 2 per cent before changes in taxes and reserve levels.
Wells Fargo’s $21.9 billion of net income last year surpassed JPMorgan Chase and Co., its largest US rival by assets. Those profits helped boost capital at Wells Fargo, which ranks first in market value and home lending.
Chief executive John Stumpf gained clearance last month to raise the quarterly dividend after passing Federal Reserve stress tests. "Revenue remained relatively stable despite the impact of fewer days in the quarter, reflecting contributions from our diversified sources of fee revenue," Chief Financial Officer Tim Sloan said. Results were helped by a $423 million tax benefit, and the company released $500 million of loan-loss reserves. Banks typically reclaim money put aside in earlier years as the economy improves and borrowers become less prone to default.
Without help from such special items, core revenue dropped more than expenses, according to Keith Horowitz, an analyst at Citigroup. "Despite the headline beat, we do not see the stock outperforming today since the beat was driven by one-timers and we did not see any signs of significant improvement on underlying core results," Horowitz wrote in a note to clients.
- Bloomberg
