Banking, finance, and taxes
Wells Fargo Lending Grows, So Do Profits
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Like its peer, JPMorgan Chase & Co. (NYSE: JPM) which reported earnings earlier this morning, Wells Fargo had its capital distribution plan blessed by the Fed earlier this year, and the bank will raise its dividend from $0.30 to $0.35 beginning in the second quarter. The firm will also repurchase 350 million of its own shares.
Wells Fargo’s tier 1 common equity ratio under the general approach of Basel III is 11.36%, and its ratio under the Basel III advanced approach is 10.04%.
Total loans rose $4.2 billion sequentially to $826.4 billion in the quarter with growth in commercial and industrial lending, commercial real estate, auto, and one-to-four family first mortgage lending.
Net loan charge-offs fell sequentially from $963 million to $825 million, or an annualized 0.41%. Non-performing assets decreased by $840 million and foreclosed assets rose sequentially from $3.9 billion to $4.1 billion.
Home loan originations fell sequentially from $50 billion to $36 billion and applications fell from $65 billion to $60 billion. The average note rate on the bank’s loan servicing portfolio fell slightly from 4.52% to 4.51%.
The bank’s CFO said:
We are very pleased with Wells Fargo’s performance in the first quarter, particularly in some of the fundamental drivers of long term growth: loans, deposits, investments, capital and credit quality. Revenue remained relatively stable despite the impact of fewer days in the quarter, reflecting contributions from our diversified sources of fee revenue. In addition, we generated revenue more efficiently as we reduced expenses year-over-year and compared with fourth quarter of last year.
The bank did not offer guidance in its press release, but the consensus estimates call for second-quarter EPS of $1.01 on revenues of $20.96 billion. The EPS estimate for the 2014 fiscal year is now $4.04.
Wells Fargo is Warren Buffett’s favorite bank and the largest piece of the Berkshire Hathaway portfolio.
Shares traded up about 1.1% in the premarket Friday, at $48.08. The current 52-week range is $36.19 to $50.49. Thomson Reuters had a consensus analyst price target of around $50.90 before the results were announced.
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