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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

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