Wells Fargo Earnings Drop, Wealth Unit Income Rises

Tom Burroughes

16 October 2008

Wells Fargo, the US bank that recently sealed a bitterly contested deal to buy rival Wachovia, said its net income in the third quarter of this year fell to $1.64 billion from $2.17 billion a year ago, but revenues and net income at its wealth division improved.

“Despite the dramatic changes in our industry and economy, the Wells Fargo team rose to the challenge this quarter and achieved solid growth in loans and deposits, a truly remarkable accomplishment,” said president and chief executive John Stumpf in a statement.

“Revenue year to date was up 11 per cent, continuing our track record of strong, double-digit growth. Our strength, security and outstanding financial performance continued to compare favorably with our industry peers,” Mr Stumpf said.

At its wealth management division, the Californian-based bank said revenue rose by 14 per cent from a year ago. Net income rose by 32 per cent from prior year. Private banking revenues jumped by 56 per cent from a year before. The statement did not give the exact financial amounts.

Wells Fargo confirmed previously announced credit write-downs of $646 million stemming from its exposure to US mortgage agencies Freddie Mac and Fannie Mae and the now-bankrupt Lehman Brothers.

The bank said it expected its purchase of Wachovia to be complete by the final quarter of this year. It sealed the deal last week after overturning a previously agreed transaction by Citi to buy Wachovia. The move has prompted Citi to sue Wells Fargo and Wachovia for a total of $60 billion.