Wells Fargo Profit Up Nearly 4%: Q2 Earnings

Wealth, Brokerage and Retirement profits up 25%

Wells Fargo headquarters in San Francisco. (Photo: AP) Wells Fargo headquarters in San Francisco. (Photo: AP)

Wells Fargo & Co (WFC). reported net income on Friday morning of $5.7 billion, or $1.01 per share, for the second quarter, up from $5.5 billion, or $0.98 per share, a year ago, in line with analysts’ expectations.

Analysts polled by Thomson Reuters expected per-share earnings of $1.01 on revenue of $20.84 billion.

For the first six months of 2014, Wells Fargo reported the net income was $11.6 billion, or $2.06 per share, up from $10.7 billion, or $1.90 per share, for the same period in 2013.

“Our results also reflected strong credit quality driven by an improved economy, especially the housing market, and our continued risk discipline,” said Chairman and CEO John Stumpf in a statement. “We are committed to both maintaining strong capital levels and returning more capital to our shareholders.”

While profit is up nearly 4% from last year, revenue for the second quarter fell slightly compared to the second quarter 2013, to $21.1 billion from $21.4 billion a year ago. But this quarter’s revenue is up from $20.6 billion in first quarter 2014.

Chief Financial Officer John Shrewsberry added in a statement, “The primary drivers of Wells Fargo’s business remained strong in the second quarter, with broad-based loan growth, increased deposit balances, and improved credit quality. Revenue increased linked quarter as the company grew both net interest income and noninterest income, a reflection of Wells Fargo’s diversified business model. These solid fundamental business results led to an increase in pre-tax income linked quarter. Net income was down as the company’s effective tax rate was lower in the first quarter due to a $423 million discrete tax benefit.”

Wealth, Brokerage and Retirement

Wells Fargo's Wealth, Brokerage and Retirement unit reported net income of $544 million for the second quarter, a 25% increase from a year ago and a 15% increase from the first quarter.

WBR had $3.6 billion of revenue in the second quarter, up 9%  from a year ago and 2% from the prior quarter, as “increased asset-based fees and higher gains on deferred compensation plan investments (offset in compensation expense) were partially offset by lower brokerage transaction revenue,” the bank said.

The retail brokerage had client assets of $1.4 trillion, up 12% from the prior year, and managed-account assets increased $78 billion, or 24% from the prior year. The bank reported strong loan growth, with average balances up 19% from a year ago on growth in first mortgage and security-based lending.

Wealth-management assets were $221 billion, up 10% from last year. Average loan balances for this group grew 10% year over year.

The unit’s retirement group reported IRA assets of $357 billion, a 13% year-over-year jump, and institutional retirement plan assets of $319 billion, up 12% from the same period of 2013.

WBR will release its 2Q'14 headcount of financial advisors over the next two weeks. In Q1'14, it had 15,146 reps.

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