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Wells Fargo profit climbs on mortgage gains

A cable car passes the Wells Fargo Bank headquarters in the Financial District in San Francisco, California March 28, 2012.

ROBERT GALBRAITH/REUTERS

Wells Fargo & Co. reported higher first-quarter profits on Friday as the bank posted strong mortgage banking results and set aside less money for bad loans.

Wells Fargo, the nation's fourth-biggest U.S. bank, said net income was $4.25-billion (U.S.), or 75 cents a share, in the quarter, compared with $3.76-billion, or 67 cents, a share in the same period a year earlier.

The average estimate from analysts was 73 cents per share, according to Thomson Reuters I/B/E/S. It was not immediately clear whether the results were comparable.

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The bank's expenses increased to $13-billion from $12.5-billion in the fourth quarter, partly because of higher personnel costs and $314-million in expenses primarily related to higher legal reserves. The bank said it is targeting expenses of $11.25-billion in the fourth quarter, which is at the upper range of its goal for an efficiency program called Project Compass.

The San Francisco-based bank, reporting a few days earlier than in the past, kicked off the bank earnings season along with JPMorgan Chase & Co, the largest U.S. bank by assets. JPMorgan said its net income was $5.4-billion, or $1.31 a share, compared with $5.6-billion, or $1.28 a share a year earlier.

Mortgage banking income at the largest U.S. originator of home loans increased to $2.8-billion from $2-billion a year ago. The bulk of the bank's mortgage applications were for refinancings.

Wells Fargo recorded a loan-loss provision of about $2-billion, which was down from about $2.2-billion a year earlier. The bank boosted results by reversing reserves it had previously booked for bad loans for the eighth straight quarter.

"Wells Fargo delivered outstanding first quarter results driven by strong revenue growth," Chief Executive John Stumpf said in a statement. "Our continued performance for shareholders through a variety of economic environments is a testament to our diversified business model."

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