Wells Fargo Q2 Profit Up 20%, Results Beat View

(RTTNews) - Wells Fargo & Co. (WFC), the fourth-largest bank in the U.S. by assets, on Friday reported a 20 percent increase in profit for the second quarter, reflecting a sharp decline in provision for credit losses and positive momentum in the residential real estate market. Both revenue and earnings per share for the quarter beat analysts' estimates.

Wells Fargo is the largest originator of home mortgages in the U.S. and under a federal program, has the mandate to originate, underwrite, and certify mortgages for FHA insurance.

Home lending originations in the quarter increased 3 percent from the prior quarter to $112 billion, while applications rose 4 percent to $146 billion.

The company's credit losses in the quarter were $1.2 billion, down 45 percent from the year-ago period. Wells Fargo noted that the consumer loss levels have improved rapidly, due primarily to the positive momentum in the residential real estate market, with home prices improving faster and in more markets than expected.

Earlier today, Wells Fargo's larger rival JPMorgan Chase & Co. (JPM) reported a 31 percent jump in second-quarter profit, on higher investment banking as well as asset management revenues. Loan loss provisions were reduced significantly in comparison with the year ago period.

Wells Fargo's second-quarter net income was $5.27 billion or $0.98 per share, up from $4.40 billion or $0.82 per share in the prior-year quarter. On average, 32 analysts polled by Thomson Reuters expected earnings of $0.93 per share. Analysts' estimates typically exclude special items.

Revenue for the quarter edged up to $21.38 billion from $21.29 billion in the same period last year. Analysts had a consensus revenue estimate of $21.22 billion.

Net interest income declined 3 percent from the prior-year quarter to $10.75 billion, while total non-interest income rose 4 percent to $10.63 billion.

Net interest margin declined to 3.46 percent from 3.91 percent in the year-ago period. Provision for credit losses fell 64 percent from the year-ago period to $652 million.

Community Banking segment net income increased 28 percent to $3.25 billion. Meanwhile, revenue decreased 1 percent to $12.94 billion, reflecting lower net interest income and mortgage banking revenue, growth in deposit service charges, and higher debit, credit and merchant card volumes.

Wholesale Banking net income rose 7 percent from last year to $2.00 billion. However, revenue edged up less than 1 percent to $6.14 billion, as strong growth across many businesses were partly offset by lower equity gains as well as lower sales and trading results.

Wealth, Brokerage and Retirement segment net income grew 27 percent from the prior-year period to $434 million. Total revenue rose 10 percent to $3.26 billion, reflecting strong growth in asset-based fees and increased brokerage transaction revenue.

WFC closed Thursday's trading at $41.89. In Friday's pre-market trades, the stock is currently gaining $0.56 or 1.34 percent to $42.45.