Profits surge for big Nevada banks

Tuesday, Oct. 15, 2002 | 10:58 a.m.

SUN WIRE REPORTS

Wells Fargo & Co., the largest bank in Nevada, today said third-quarter earnings rose 10 percent as more homeowners sought low-rate loans from the biggest U.S. mortgage lender. The bank also set aside less for bad loans.

Net income at the fifth-biggest U.S. bank, which is based in San Francisco, climbed to $1.44 billion, or 84 cents a share, from $1.31 billion, or 75 cents, in the same period last year, the company said in a statement.

Separately, Citigroup and Bank of America reported third-quarter earnings today above analysts' estimates as profits from retail operations more than offset weakness in investment banking and trading.

And U.S. Bancorp of Minneapolis, a big player in the Nevada banking market, said third-quarter profit rose as fees from processing credit card transactions rose and the eighth-largest U.S. bank wrote off less in bad loans.

Net income climbed to $860.3 million, or 45 cents a share, from $38.7 million, or 2 cents, a year earlier, U.S. Bancorp said.

The company said it wrote of $329 million in bad loans, including lending to the communications, cable and manufacturing industries, compared with $563.3 million in the quarter a year ago. Non-performing assets fell 16 percent from a year earlier to $183 million.

Citigroup, operator of Citibank branches and a Citibank call center in Las Vegas, said net income rose to $3.92 billion, or 76 cents a share, in the July-September period from $3.18 billion, or 61 cents a share, a year earlier.

Excluding special charges, most related to the spin-off of its Travelers Property Casualty unit, earnings were $3.79 billion, or 74 cents a share, up from $3.26 billion, or 62 cents a share, a year earlier

Merrill Lynch analyst Judah S. Kraushaar said "investors should be broadly reassured by the results," which he said reflected strength in Citigroup's consumer and investment management divisions.

Citigroup Chairman and Chief Executive Sanford I. Weill said in a statement he was "exceptionally pleased" with the results given the state of the global economy.

"This strong performance took place against the backdrop of macroeconomic challenges in Argentina and the political uncertainty in Brazil, which negatively impacted our results, as well as exceptionally weak equity markets, which have reduced the value of our proprietary investment portfolio and led to further realized losses in the insurance portfolios," he noted.

Citigroup said that in addition to writing off Argentina-related and telecommunications loans, it had increased its reserve for loan losses by $238 million to $10.7 billion.

Weill also used the report to emphasize that the banking behemoth was committed to sorting out allegations stemming from the company's role in financing the failed energy company Enron, possible conflicts of interest involving its analysts and concerns over the allocation of profitable initial public offering shares.

"Foremost in our minds has been restoring the trust of our customers and shareholders, and we continue to focus our efforts on resolving the issues facing our industry," Weill said.

And Bank of America said that strong performance in its retail operations -- including mortgages, credit cards and deposits -- boosted net income to $2.24 billion, or $1.45 a share, in the July-September period from $841 million, or 51 cents a share, a year earlier.

The 2001 figures included costs related to leaving the auto leasing and subprime real estate lending businesses as well as a "goodwill" write-down.

The bank is based in Charlotte, N.C., and is the second-largest in Nevada. Chairman Ken Lewis noted that strength in retail operations offset weakness in market-related revenue from trading and equity investments.

"We continue to benefit from our diversified business mix," said Lewis, who also is the bank's chief executive officer. "Third-quarter performance was led by strong growth in consumer banking, demonstrating the progress we're making in executing our customer-focused strategy."

Charge-offs on bad loans and leases totaled $804 million in the third quarter, down from $1.25 billion a year earlier, the bank said. The year-earlier figure had been inflated by losses from the subprime real estate business.

In the meantime, Wells Fargo Chief Executive Richard Kovacevich is relying on consumers as rivals such as J.P. Morgan Chase & Co. lose money on loans to telecommunications companies and other corporate borrowers that are having trouble paying their debts. Demand for mortgages is surging, with the average interest rate on a 30-year fixed loan at its lowest level in more than three decades.

"The mortgage business continues to do extremely well," said Chris Bingaman, who helps manage $100 million, including Wells Fargo shares, for the Diamond Hill Investment Group in Columbus, Ohio.

Revenue rose 10 percent to $6.04 billion as income from lending climbed 15 percent to $3.7 billion, fueled by a 78 percent surge in mortgage originations to $89 billion.

Wells Fargo set aside $395 million for loan losses, down 13 percent from the same period a year earlier and 3.7 percent from the second quarter.

Fee income rose 2.7 percent to $2.3 billion from the same period a year earlier. Net income matched the average analyst estimate, according to a poll by Thomson First Call.

Wells Fargo stock, up 8.7 percent this year, is the second-best performer in the Philadelphia KBW index of U.S. banks and thrifts, after Golden West Financial Corp.