Wells Fargo reports surge in profit

Michael Liedtke

Tuesday, April 15, 2003 | 11:27 a.m.

SAN FRANCISCO -- Wells Fargo & Co. today reported the latest in a string of quarterly earnings gains that have been propelled by the bank's success at selling financial staples amid economic uncertainty.

The San Francisco-based bank, the largest in Nevada, earned $1.49 billion, or 88 percents share, for the three months ended March 31. That represented a 35 percent improvement from net income of $1.1 billion, or 64 cents per share, last year.

This year's profit would have been 8 percent higher than last year's earnings if not for a 2002 accounting charge unrelated to Wells' ongoing operations.

The latest results were a penny above the consensus estimate among analysts polled by Thomson First Call, continuing a recent run of pleasant surprises for the largest U.S. bank headquartered west of the Mississippi.

Wells' shares gained 6 cents to $46.86 during early trading today on the New York Stock Exchange.

Despite the sour economy of the past few years, Wells has prospered with a financial recipe emphasizing banking basics such as home mortgages, credit cards and checking accounts.

Wells' first-quarter revenue totaled $6.51 billion, a 9 percent increase from $5.96 billion at the same time last year.

The bank's revenue growth has been hovering at around 10 percent since the 1998 arrival of a new management team as part of a merger between Wells and Minneapolis-based Norwest.

Under the leadership of former retailer Dick Kovacevich, Wells began referring to its offices as "stores" instead of "branches" to punctuate a more aggressive sales approach that seems to work in good times and bad.

"We continue to be optimistic about the future because of our proven business model," Kovacevich said.

A 40-year low in mortgage rates has played an important role in the bank's recent prosperity.

The bank originated $103 billion in mortgages in the first quarter, just below its record volume of $112 billion in the final three months of last year.

The mortgage business continued to be brisk even though regulators in California -- Wells' biggest market -- have alleged the bank is imposing interest charges on borrowers earlier than state law allows. The bank has denied the charges and federal regulators have sided with Wells in the dispute.

Wells ended the quarter with $89 billion in mortgages still in its pipeline, a 29 percent increase from the same time last year.

Credit cards also are helping to boost Wells. The bank's credit card sales rose 20 percent in the first quarter, generating more finance charges and highly profitable fees. The bank collected $243 million in credit card fees during the first quarter, a 21 percent increase from $201 million at the same time last year.