Tuesday, Oct. 19, 2004 | 11:16 a.m.
STAFF AND WIRE REPORTS
Wells Fargo & Co. and U.S. Bancorp, two of the 10-biggest U.S. banks, said today that third-quarter profit rose 12 percent as the companies increased consumer lending and gathered more fees from credit cards and deposits.
Wells Fargo, based in San Francisco and the No. 4 bank, said net income advanced to $1.75 billion, according to a statement. Minneapolis-based U.S. Bancorp, the sixth-biggest bank, said profit rose to $1.07 billion.
Wells Fargo has more than 60 Las Vegas-area branches and about 1,100 local employees. U.S. Bank has 35 branches and 294 employees.
Wells Fargo, the top U.S. mortgage lender, had its first revenue drop in more than three years as revenue from home lending slid 40 percent to $623 million. Consumer and commercial lending gained. U.S. Bancorp set aside less money for bad loans.
"In the banks that have reported earnings so far, the consumer has far and away been the strongest part of their businesses," said Wayne Bopp, who helps manage $35 billion, including Wells Fargo and U.S. Bancorp shares. "The consumer is still hanging in there and now we're waiting for the commercial side to really pick up."
Shares of Wells Fargo fell 64 cents to $59.51 at 10:30 a.m. in New York Stock Exchange composite trading. U.S. Bancorp lost 29 cents to $29.15.
Wells Fargo's net income increased to $1.75 billion, or $1.02 a share, from $1.56 billion, or 92 cents, a year earlier. Revenue fell less than 1 percent to $7.3 billion, missing the average $7.49 billion estimate of analysts polled by Thomson Financial. Mortgage revenue declined as new home loans tumbled 58 percent to $68 billion.
Wells Fargo is second only to Countrywide Home Loans in mortgage lending in the Las Vegas market.
Kirk Clausen, president of Wells Fargo's Nevada Operations, said the local results mirror the national results, including the slowdown in mortgage business.
"We had planned for a considerable drop in mortgage business, both nationally and (in Nevada)," Clausen said, adding that while a boom may have passed mortgage business is still "fairly robust."
He also agreed that the diversity of Wells Fargo's business insulates the bank from drop offs in particular segments. Clausen described the business model as "bullet proof."
Wells Fargo currently serves -- in one or more business lines -- about 370,000 households, Clausen said.
Average commercial loans increased 5.5 percent to $49.5 billion, Wells Fargo said Average consumer loans climbed 38 percent to $178 billion.
"Excluding mortgages, everything else in the company is growing," Howard Atkins, Wells Fargo's chief financial officer, said in a telephone interview. "All of our consumer credit portfolios are growing and commercial loans are strong."
Wells Fargo's net interest margin, or the difference between what it pays for funds and charges to extend credit, widened to 4.89 percent from 4.83 percent in the second quarter. The margin narrowed from 5.01 percent a year earlier.
The bank set aside $408 million for bad loans, a 4 percent decline from a year earlier.
U.S. Bancorp's net income climbed to $1.07 billion, or 56 cents a share, from $950.9 million, or 49 cents, a year earlier, the bank said in a statement. Profit matched the average estimate of analysts polled by Thomson Financial.
Revenue climbed 10 percent to $3.3 billion as fees climbed in U.S. Bancorp's corporate banking and credit and debit-card processing units. The company said it had double-digit percentage profit growth in four of its five businesses, including gains in consumer banking and asset management.
Fee income climbed 29 percent in the quarter to $1.5 Billion. Lending income fell 2.4 percent to $1.78 billion.
"Our payment services and consumer banking business lines led the way in fee revenue generation and continued to produce outstanding results, helping to offset weakness in commercial lending," U.S. Bancorp Chief Executive Jerry Grundhofer said in the company's statement.
Bloomberg News
and Sun business writer Kevin Rademacher contributed to this report.
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