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Q2 Earnings: Wells Fargo Beats Estimates; Advisor Headcount Drops

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Wells Fargo reported record net income of $3.9 billion, or $0.70 per share, for the second quarter of 2011, up from $3.1 billion, or $0.55 per share, a year ago and a slight increase from $3.8 billion, or $0.67 per share, for the first quarter of 2011.

The company’s latest earnings results beat analysts’ estimates by 1 cent

“Our business fundamentals were strong with increased revenues, loans and deposits, lower operating costs,  improved credit quality and higher capital levels,” said Chairman and CEO John Stumpf in a statement.

“We’re right on track with our integration, having converted 2,215 Wachovia stores to date, including most recently one of our largest East Coast states, Florida,” Stumpf explained. “We continue to be focused on building and managing our diversified company for the long-term benefit of our team members, customers, shareholders and communities, and feel we are very well positioned to capture future growth opportunities.”

Revenue was about $20.39 billion, compared with $20.33 billion in first quarter 2011 and $21.39 billion in the same year-ago quarter. Analysts had estimated that Wells Fargo would have sales of $20.46 billion.

Brokerage Results

The Wealth, Brokerage and Retirement group – which includes Wells Fargo Advisors – had net income of $333 million in the June quarter, up from $270 million a year ago but down slightly from $339 in the March quarter.

Revenue for the group was $3.1 billion, up 8% from the year-ago period and down 2% from first quarter 2011 due to lower brokerage transaction revenue, according to the company. The year-over-year increase, it says, was driven by “higher asset-based revenues and higher securities gains in the brokerage business.”

Noninterest expenses declined 3% from first quarter on reduced personnel costs and increased 6% year over year “due to growth in personnel costs, primarily broker commissions driven by higher production levels.”

Wells Fargo Advisors says it is the nation’s third-largest brokerage business with 15,194 financial advisors and about 3,800 bankers – for a total number of 18,989 licensed professionals. Nearly 11,100 financial advisors work in the traditional brokerage channel of Wells Fargo Advisors. The firm’s in-bank brokerage channel employs 2,708 FAs and 3,795 licensed bankers located in Wachovia and Wells Fargo bank stores.

In the prior quarter, Wells Fargo had 200 more licensed professionals or 19,194 FAs, 15,236 traditional FAs and 3,958 licensed bankers. At the end of 2010, WFA had 19,574 advisors – with 15,188 in non-bank channels and 4,386 in banks. 

Year over year, Wells Fargo says the number of traditional FAs is up 1%.

For the retail brokerage operations, client assets of $1.2 trillion were up 12% from the prior year. Managed account assets increased $62 billion, or 31%, from a year ago “driven by strong net flows and solid market gains,” according to Wells Fargo.

Average assets per FA are roughly $63 million, including the bank advisors; excluding this group, average AUM is $80 million per FA.

Average annualized sales or production per FA based on the latest quarter’s results stands at $653,000 vs. $669,000 in the previous quarter. Excluding bank reps, this figure is roughly $816,000 vs. $840,000 in Q1.

During the second quarter, the company announced the sale of H.D. Vest Financial Services.

In wealth management (excluding Wells Fargo Advisors), client assets of $204 billion were up 8% from the prior year, as were investment management and trust asset-based revenue.

Institutional retirement plan assets of $247 billion grew 18% year over year, while IRA assets of $286 billion jumped 16%.


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