Tuesday, July 20, 2004 | 11:03 a.m.
SUN STAFF AND WIRE REPORTS
Wells Fargo & Co., the fifth-largest U.S. bank, today said second-quarter profit increased 12 percent as it boosted consumer lending and earned more fees from services including insurance and managing investments for individuals.
Net income rose to $1.71 billion, or $1 share, from $1.53 billion, or 90 cents, a year earlier, San Francisco-based Wells Fargo said in a statement. Revenue gained 7 percent to $7.43 billion while average loans rose 30 percent to $266 billion.
Kirk Clausen, president of Wells Fargo's Nevada operations, said the national results follow the same strong trends seen in Las Vegas. Wells Fargo has more than 60 Las Vegas-area branches and about 1,100 local employees.
"It mirrors almost perfectly," Clausen said. "That has to do with the strength particularly here in Las Vegas, but also statewide."
The bank increased profit an eighth straight quarter by selling more consumer banking services including checking accounts and mutual funds. Wells Fargo, the biggest U.S. mortgage lender, is counting on gaining business from consumers other than home loans as rising interest rates crimp demand for mortgages.
Clausen said that strategy has been successful. As mortgage refinancing business has slowed, business has picked up in the home equity loan market. He also said the commercial lending business has begun to grow, particularly among mid-level companies, those with between $2 million and $20 million in annual revenue. Those companies are borrowing for new equipment and expansion plans that may have been stalled in recent months because of concerns over the economy.
"We simply haven't seen the robustness in quite some time," Clausen said. "I think there's some pent-up interest there, and I think it reflects nicely on the strength of the local economy."
Shares of Wells Fargo were down 81 cents to $57.64 in early trading this morning. The stock had declined 2.8 percent in the first six months of this year, lagging the 1 percent decline in the 24-member Philadelphia KBW Bank Index. The average estimate of analysts polled by Thomson Financial as for profit of $1.04 a share.
Lending income rose 4 percent to $5.07 billion. Fee income increased 8 percent to $3.2 billion as sales from insurance, credit cards and trust services rose. Expenses rose to $4.4 billion from $4.2 billion a year earlier.
Wells Fargo has focused on making acquisitions in the past year to expand the company's asset-management business. Wells Fargo in May agreed to buy the assets of Strong Capital Management Inc. It also has bought part of Montgomery Asset Management LLC in San Francisco and Benson Associates LLC in Portland, Oregon. With Strong Capital, Wells Fargo will have more than $100 billion in mutual-fund assets.
Wells Fargo didn't disclose how much it's paying for Strong Capital, the Menomonee Falls, Wis.-based mutual fund company that in the May agreed to settle allegations of improper mutual fund trading with regulators. Terms of the purchase weren't disclosed.
Strong Capital oversees about $34 billion, with 80 percent of that in 70 mutual funds managed for 414,000 U.S. households. The purchase will be completed early next year.
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