Profit up at three U.S. banks

Tuesday, Oct. 21, 2003 | 11:13 a.m.

SUN STAFF AND WIRE REPORTS

Wells Fargo & Co., Bank One Corp. and U.S. Bancorp today said third-quarter profit rose as lending to consumers increased and the banks wrote off fewer bad loans.

Wells Fargo, the biggest U.S. mortgage lender, reported an 8.1 percent increase in net income as more customers refinanced their homes. At Bank One, the sixth-biggest U.S. bank by assets, rising revenue from deposits and mutual funds boosted net income 7.3 percent. Minneapolis-based U.S. Bancorp said profit rose 15 percent to a record because of higher lending fees.

U.S. banks are benefiting from benchmark interest rates that fell to the lowest in more than four decades in June. Consumers are borrowing more, while rising corporate profit spurred by an economic rebound mean more companies are paying back loans.

In Las Vegas, local bank executives said performance has been strong across the board.

"We have actually, in a number of categories, seen 8 percent to 15 percent better performance over last year," said Kirk Clausen, president of Wells Fargo Bank of Nevada, adding that performance in the state was strong in loan growth, deposits and in household customer base.

Wells Fargo has 63 branches and about 1,800 Las Vegas-area employees.

Echoing the statements of several other Las Vegas bank executives, Clausen said fears early in 2003 of a possible commercial lending slump in light of a weak economy and international unrest never materialized.

"I am sure there are and were some fence sitters," he said. "However, I am delighted with the growth in those areas."

Ken Ladd, president of US Bank's Nevada operations, said commercial lending was slower early in the year.

"In the first part of the year, there was some of that (delay) going on," he said. "If you made a capital investment there was not a lot of confidence that you could get a return. In the last four to five months, it's been a 180-degree difference. ... We have seen a lot more activity."

US Bank has 22 branches and 246 employees in the Las Vegas area.

Ladd, also chairman of the Nevada Development Authority, said the boost has come from new businesses moving into the state, some escaping the high cost of doing business in California, and a move by businesses to take advantage of low interest rates and buy their buildings.

Nationally, analysts are touting the improvement in credit quality for the banking industry.

"Banks are saying we're past the worst" for loan defaults, said Thane Bublitz, who helps manage about $56 billion of assets at Thrivent Financial for Lutherans in Appleton, Wisc., and bought shares of Wells Fargo this year. "Credit quality seems to be improving across the board."

Wells Fargo shares rose 15 cents to $55.52 at 10:32 a.m. in New York Stock Exchange composite trading. Bank One rose 45 cents to $42.46, and U.S. Bancorp rose 42 cents to $25.95.

Wells Fargo's earnings rose to a record $1.56 billion, or 92 cents a share, from $1.44 billion, or 84 cents, the company said in a regulatory filing. Analysts surveyed by Thomson Financial expected the San Francisco-based bank to earn an average of 93 cents a share. Revenue climbed 19 percent to $7.2 billion.

New mortgage applications rose to a record earlier in the year and analysts said the bank was helped by a backlog of home loan demand in the three months that ended Sept. 30.

Mortgage banking fees climbed 81 percent to $773 million. Non-interest expenses rose 29 percent, led by a 39 percent increase in incentive compensation.

"The mortgage earnings are strong because of a lot of momentum coming into the third quarter," said Steven Wharton, who helps manage $55 billion, including shares of Wells Fargo and Bank One, at Loomis Sayles & Co. in New York.

U.S. Bancorp, the eighth-biggest U.S. bank by assets, said third-quarter profit rose 15 percent because of higher fees from lending to individuals and a decline in loan write-offs.

Net income was 51 cents a share compared with 45 cents in the same period last year. That matched the average estimate of analysts polled by Thomson.

Revenue fell 3 percent to $3.21 billion in the latest quarter, mainly from a decline in gains from sales of stocks and bonds. The bank set aside $310 million to cover uncollectable loans in the quarter compared with $330 million a year earlier.

"The company continued to show improvement in overall credit quality," said U.S. Bancorp Chief Executive Jerry Grundhofer said in a statement. "We believe that the improving trends will continues."

Costs declined 15 percent to $1.4 billion as the company wrote off fewer mortgage servicing contracts in the quarter. Those contracts had fallen in value when interest rates fell in previous quarters because many were canceled as customers refinanced their mortgages.