Q3 Earnings: Wells Fargo Misses Estimates; Assets, Advisors Decline

Wells Fargo says it now has 15,188 financial advisors, down from 15,194 in the second quarter of 2011 and 15,236 in the first quarter

Wells Fargo reported third-quarter earnings on Monday of 72 cents a share on net income of $4.1 billion, missing analysts’ estimates by a penny but beating last year’s earnings of 60 cents a share on net income $3.3 billion by 20%. The San Francisco-bank also revealed that its advisor headcount and asset levels have fallen slightly since the second quarter of 2011.

Overall revenues for Wells Fargo declined 6% to $19.63 billion in the most recent period from $20.87 billion in the year-ago quarter.

"We can't change the economic environment, yet we have worked hard to control the variables we can," said Chairman and CEO John Stumpf in a statement. "The economic recovery has been more sluggish and uneven than anyone anticipated."

Average bank loans fell to $745.5 billion as of Sept. 30, from $759.5 billion in the third quarter of 2001. In addition, the bank’s net-interest margin declined to 3.84% from 4.25% in the year-ago period.

“While our industry continued to face challenges due to economic conditions during this quarter, Wells Fargo’s diversified model was again able to produce solid results for our shareholders, ” said CFO Tim Sloan in a statement.

Brokerage Business

Wells Fargo’s wealth, brokerage and retirement (WBR) unit reported net income of $291 million, up 14% from $256 million a year ago but down 13%, or $42 million, from $333 million in the second quarter of 2011.

Revenue dropped 6% sequentially to $2.9 billion, “primarily due to losses on deferred compensation plan investments (offset in expense), as well as lower securities gains in the brokerage business and reduced brokerage transaction revenue,” the company said in a statement.

Year-over-year revenue fell 1% due to “losses on deferred compensation plan investments (offset in expense) and lower brokerage transaction revenue, partially offset by higher asset-based revenues,” according to the company.

Non-interest expense for the WBR operations moved down 5% from the second quarter on reduced personnel costs (primarily due to lower deferred compensation) and reduced broker commissions, Wells Fargo says.

From the year-ago quarter, non-interest expense declined 2% thanks to lower deferred compensation, partially offset by growth in personnel costs tied to increased broker commissions, driven by higher production levels and increased non-personnel costs.

Wells Fargo Advisors had client assets of $1.1 trillion as of Sept. 30, a 3% drop from last year.

However, the company says it also experienced "strong deposit growth in the third quarter, with average balances up $11 billion," or 14%, from the prior year. Also, managed account assets increased $20 billion, or 9% from the year-ago period.

The unit, which completed the sale of H.D. Vest Financial Services business on Oct. 3, says it now has 15,188 financial advisors and 3,590 licensed bankers–or a total of 18,778.

In the second quarter, WFA had 15,194 advisors and roughly 3,800 bankers–representing 18,789 professionals administering some $1.2 trillion dollars. (It had 15,236 FAs and 3,958 bankers in Q1 of 2011.)

This puts it behind rivals Morgan Stanley and Merrill Lynch in its advisor headcount, but ahead of UBS in the Americas.

Read AdvisorOne's Q3 Earnings Calendar to keep track of earnings releases for the finance sector.

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