Wells Fargo Posts Rise in Profit

[Aug 7, 2007.]

 

Wells Fargo, one of the nation's leading providers of home loans, saw its second quarter profits rise 9%, despite the difficulty that some consumers are having paying their mortgages this year.

Analysts credit the rise to customer service fees and the sale of additional products. From April to June, Wells Fargo earned $2.28 billion, which amounted to 67 cents a share. Last year, the company's net income was only $2.09 billion, or 61 cents a share.

Meanwhile, Wells Fargo's revenue grew 13%, climbing to $9.89 billion. That figure represents the company's largest quarterly hike in just about 2 years, when the revenue increased some 16%.

American consumers faced a number of financial challenges during the second quarter, including higher interest rates, a national housing slump, and ever-increasing fuel prices. Consequently, consumer budgets have been tight, and the subprime market has been especially hard-hit.

Wells Fargo lost about $10 million in subprime loans from April to June. Still, Wells Fargo officials say they're better equipped to weather the subprime storm than other lenders thanks, in part, to their more stringent paperwork requirements.

Yet, Wells Fargo is not immune to the problems within the real estate industry. For instance, the lender reports that an increasing number of its customers are falling behind on their home equity loans. As a result, Wells Fargo may suffer losses in its home equity loans during the remainder of the year. The home equity problems appear to be most acute in the Midwest and on the West Coast.

Still, Wells Fargo is taking a proactive approach, offering consumers additional services and collecting additional fees as a result. The banks' fees from credit and debit cards totaled more than $500 million. Through intensive retailing efforts, Wells Fargo hopes to avoid some of the problems that other lenders are experiencing.

Julie Ann Amos
August 7th 2007

Recent Housing News

• Debit Card Use Can Yield Some Unwelcome Surprises
  Debit card use has exploded in recent years, with consumers turning to the cards as a convenient alternative to writing checks.


• Consumers Question Credit Report Offers
  Some American consumers this summer are questioning "deals" offering copies of credit reports to those who pay for special services. While the practice is legal, experts say it may not be the best idea for a consumer's bottom line.[6th August 2007]


• Citigroup Sees Rise in Second Quarter Profits
  Citigroup Inc. is reporting an 18 percent jump in its second-quarter profit.[6th August 2007]


• Consumer Optimism May be Building
  Consumer optimism appears to be growing again, according to a Reuters/University of Michigan Surveys of Consumers. The optimism appears to be fueled by renewed hope in the job market and in salary situations. [6th August 2007]


• Home Construction Rises
  The troubled housing industry received some positive news recently with a report that new home construction increased 2.3% in June. However, enthusiasm was dampened by the fact that the new construction rate in May was revised downward. [2nd Aug 2007]


• Economic Growth May Be Lower Than Expected
  The head of the Federal Reserve Board is taking a conservative course when it comes to predictions about the economy—a move that's being applauded by some in the investment sector. [2nd Aug 2007]


• Inflation Concerns Continue
  It appears that members of the Federal Reserve Board continue to be concerned about the specter of inflation.[2nd Aug 2007]


• Fed Surveys Consumers About Credit
  The Federal Reserve Board has now released its report on credit card solicitations and applications. The findings are significant, since the study included personal one-on-one interviews with American consumers. [1st Aug 2007]


• Gaining Credit May Be Getting Tougher for College Grads
  A change in practices in the U.S. credit card industry may mean that it will be tougher than ever for college graduates to establish credit. [1st Aug 2007]


• Mortgage Rates Unmoved
  Prospective homebuyers received some encouraging news recently, thanks to the fact that rates on 30-year mortgages stayed steady. The decision to maintain the status quo might have been surprising to some, given all the concerns being raised about inflation at this point in time. [1st Aug 2007]