Wells Fargo reports record first-quarter profit

Staff and wire reports

Published Wednesday, April 22, 2009 | 7:51 a.m.

Updated Wednesday, April 22, 2009 | 7:30 p.m.

Wells Fargo & Co., operator of scores of bank branches and lending offices in the Las Vegas area, on Wednesday reported a record first-quarter profit in line with its forecast, easily beating the average analyst estimate.

Despite the record results, San Francisco-based Wells Fargo, like many major banks, continues to report higher credit costs.

Its shares initially rose Wednesday, but closed down 63 cents at $18.18.

The San Francisco-based bank, which bought Wachovia Corp. last fall at the height of the credit crisis, says it earned $2.38 billion, or 56 cents per share, in the January-March period. This compares with $2 billion, or 60 cents per share, a year earlier.

The decrease in the 2009 earnings-per-share figure as compared with the prior-year figure was due to an increase in average common shares outstanding.

Before paying preferred dividends, the company earned $3.05 billion. Revenue for the quarter totaled $21 billion.

On the surface, the report gave investors few surprises, as results were in line with the bank's most recent forecast. Wells Fargo had dazzled investors earlier this month when it said it would report a record first-quarter profit of $3 billion, much more than analysts had been expecting. That sent its shares soaring 31.7 percent.

Analysts, on average, had predicted a profit of 23 cents per share on revenue of $19 billion. Since the announcement, the average analyst estimate increased to 41 cents per share.

Net chargeoffs, or loans written off as unpaid, totaled $3.26 billion, or 1.54 percent of average loans. This included $371 million of chargeoffs in the Wachovia loan portfolio. Legacy Wells Fargo chargeoffs were $2.89 billion, or 2.82 percent of average loans, up slightly from $2.8 billion, or 2.69 percent, in the fourth quarter. Nonperforming assets, or loans past due, totaled $12.61 billion, or 1.5 percent of total loans.

The bank said it benefited from certain purchase accounting adjustments recorded when it closed its acquisition of Wachovia on Dec. 31. As a result of having already written down Wachovia's higher-risk portfolios for their expected losses, the remaining portfolio had lower loss rates.

In the Las Vegas area, Wells had 83 branches and some $5.3 billion in deposits before the merger. Wachovia had five Southern Nevada-area offices with deposits of about $784 million.