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Wells Fargo, Weighed Down by Sour Loans, Posts Drop in Profit

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Wells Fargo & Co., still sorting through Wachovia’s sour consumer loans, said Wednesday, April 21, that first-quarter earnings fell 16% to $2.54 billion. Profits in its wealth, brokerage and retirement businesses, though, leapt 60%.

Overall, Wells Fargo earned 45 cents a share compared to $2.38 billion, or 56 cents a share, in the same quarter a year ago. Analysts expected a profit of 42 cents per share, according to Thomson Reuters. Revenue rose 2% to $21.4 billion.

There was some improvement in consumer loans, as Wells Fargo set aside $5.3 billion to cover bad loans during the quarter, down 9.9% from the fourth quarter. In the same period a year earlier, it had set aside $4.6 billion.

Mike Loughlin, chief credit and risk officer, said in a statement, “We believe quarterly provision expenses and quarterly total credit losses have peaked.”

The wealth, brokerage and retirement group reported income of $282 million, up from $176 million, from the same quarter last year. Revenue rose 16% to $2.9 billion, from the prior-year period, driven by growth in asset-based fees and brokerage transactional activity.

Managed account assets increased $67 billion, or 47%, from the prior year driven by the strong market recovery and solid net flows. Wells Fargo said that recruiting of financial advisors was solid during the quarter, as brokers who joined the firm were two times more productive than those who left the firm.

Institutional Retirement plan assets increased 35% to $232 billion, from the same quarter in the prior year. IRA assets rose to $248 billion, an increase of 28%, from the prior year.

Read the full version of Wells Fargo’s earnings report.

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