Wells Fargo earned $2.37 billion for common shareholders in the first quarter, beating analyst expectations and trumpeting that credit has "turned a corner." The San Francisco bank sought to set itself apart from rivals Bank of America, J.P. Morgan Chase and Citigroup, who in the past week have reported big earnings based on investment banking activities. Those Wall Street-services, like trading bonds or packaging securities, carry the potential for big profits but also big risks.
Wells emphasized that its earnings came from all its business units, with recession- proof items like debit cards, insurance and retirement services posting strong results.
"I'm not trying to make a disparaging remark about investment banking," chief financial officer Howard Atkins said in an interview with the Observer. "But the point is that Wells Fargo is not dependent on any one of its businesses for its revenue growth."
This is the first full earnings period since Wells, the country's fourth-largest bank, repaid its $25 billion loan from the government's TARP program. It's also the first time in months that all of the four megabanks reported profits — a sign that the banks, boosted by taxpayer dollars in the depths of the financial crisis, are positioned again for big earnings.
Wells' earnings of $2.37 billion are more than six times the amount of earnings in the fourth quarter, when the bank shored up cash to repay government loans. But they're virtually identical to earnings from the first quarter of 2009, when the bank made $2.38 billion. They slightly beat analyst expectations of $2.18 billion.
Wells Fargo, which has held up relatively well in the financial crisis, sounded largely optimistic about the economy. The bank says it believes that provisions for loan losses peaked in the third quarter, and that total credit losses peaked in the fourth quarter. It also noted that early-stage delinquencies in home equity, auto dealer services and credit cards are improving.
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