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Wells Fargo Reports Record Q3 Profit

Riding on the acquisition of Wachovia, which is adding value to its customers across the North America

Wells Fargo has reported diluted earnings per common share of $0.56 for third quarter 2009 compared with $0.57 for second quarter 2009 and $0.49 for third quarter 2008. The bank’s net income was a record $3.24 billion for third quarter 2009, up 98% from last year, and a record $9.45 billion for the first nine months of 2009, up 75% from last year.

Community Banking reported net income of $2.7 billion, up $659 million, or 131% (annualized), from second quarter. Revenue increased $336 million, or 9% (annualized), driven by strong regional banking and mortgage fee income partially offset by a decrease in net interest margin.

Wholesale Banking reported net income of $598 million compared with $1.07 billion in second quarter 2009. Revenue decreased $322 million, primarily due to strength in investment banking and capital markets revenue in the prior quarter, as well as insurance revenue seasonality.

Wealth, Brokerage and Retirement reported net income of $244 million, compared with $363 million in the prior quarter. Revenue was $3 billion consistent with the prior quarter’s levels as the strong equity market recovery led to increases in client assets across the brokerage, wealth and retirement businesses, driving solid revenue growth, partially offset by lower realized gains on sales of securities available for sale in the brokerage business.

John Stumpf, president and CEO, Wells Fargo, said: “The Wells Fargo-Wachovia merger, agreed to a year ago, is exceeding our expectations and already adding value for many of our 70 million customers across North America. Merger costs have been significantly less than originally expected. With our 80-plus businesses pulling the stagecoach, the diversity of our business model again showed significant power to generate capital internally. We had solid performance across our company – especially among counter-cyclical businesses such as deposits, residential mortgages, debit card and asset-based lending. We’re also doing what’s right for our mortgage customers having difficulty making their payments on time.”

Howard Atkins, CFO, said: “Third quarter results again illustrated the company’s ability to profitably grow, even through the downward cycle despite elevated credit losses. Since the merger with Wachovia at year-end 2008, we’ve earned a record $9.45 billion, even after building credit reserves by $3 billion and recording $1.4 billion of other-than-temporary impairment (OTTI) charges. We continued to maintain what we believe is one of the strongest balance sheets in banking, building credit reserves by $1 billion in the quarter to $24.5 billion, or 3.07% of total loans, reducing previously identified non-strategic and liquidating loan portfolios to $152.7 billion, down over $14 billion from year end, and reducing the value of our debt and equity investment portfolios through $396 million of OTTI.

“We have significantly built capital, increasing common stockholders’ equity to $123 billion, up $23 billion so far in 2009 and increasing Tier 1 common to 5.2%, nearly two times our capital position at year-end 2008. Nonperforming loans and net charge-offs increased in the quarter, but the rate of growth of non-performing loans has declined each quarter so far this year," he added.