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

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.