Wells Fargo first-quarter profit up 18%

Michael Nol

Tuesday, April 20, 2004 | 11:15 a.m.

Wells Fargo & Co., the fifth-biggest U.S. bank, said first-quarter profit rose 18 percent as the company opened more accounts and made more loans to consumers.

Wells Fargo has about 60 Las Vegas-area branches and more than 1,000 local employees.

Net income increased to a record $1.78 billion, or $1.03 a share, from $1.49 billion, or 88 cents, a year earlier, the company said in a statement. Analysts surveyed by Thomson Financial expected the San Francisco-based company to report earnings per share of 98 cents a share. Revenue rose 7 percent to $7.1 billion from a year earlier.

Chief Executive Officer Richard Kovacevich is increasing revenue by signing up customers for credit cards, checking accounts, mutual funds and other services, helping make up for slowing demand for loans to buy and refinance homes at the biggest U.S. mortgage lender.

"Wells Fargo is in attractive geographic markets, and that's providing something of a tailwind for them," said Mark Batty, who helps manage $51 billion at PNC Financial Services Group in Philadelphia, including 6.3 million Wells Fargo shares. "They're positioned for faster growth."

Fees rose 9 percent to $3.1 billion in the quarter, driven by higher revenue from deposits, investment services and credit-card charges. Net interest income, which the bank makes from lending, increased 5 percent to $4.05 billion.

Slowing mortgage growth may prompt Kovacevich to look further for new sources of profit. Wells Fargo's mortgage fees fell 44 percent to $315 million.

U.S. Mortgage loans in 2004 are expected to decline 33 percent to $2.57 trillion, according to the Mortgage Bankers Association.

Wells Fargo, the second-biggest bank in California and the biggest in Nevada and New Mexico in terms of deposits, has concentrated on buying insurance brokers and investment management firms to bolster profit growth in recent quarters, purchasing seven insurance firms and two investment advisers in the past eight months.

Its last purchase of a bank was the $623 million acquisition of Pacific Northwest Bancorp to expand in Washington and Oregon.

The company's return on assets, a measure of profitability, was 1.84 percent, and return on equity was 20.3 percent, the highest since 1998, the company said.