By Shahien Nasiripour
NEW YORK – Wells Fargo’s quarterly profit surged 21 per cent to a record $4.1bn, but revenue from the fourth-largest US bank by assets still dropped slightly short of expectations and its shares fell in pre-market trading.
The largest US home lender missed analysts’ expectations by one cent with earnings of $0.72 a diluted share. Its shares fell 6.2 per cent to $25.03 in early trading in New York.
Wells reported a small rise in lending, up 1 per cent year-on-year to $760bn, but had a 6 per cent slide in revenue to $19.6bn, a reflection of the industry’s central challenge amid a sluggish economy and weak consumer demand.
The lender cut expenses by 5 per cent to $11.7bn, bolstering its bottom line, and reported improved credit quality as those who could borrow increasingly made their payments on time.
“The economic recovery has been more sluggish and uneven than anyone anticipated,” John Stumpf, the bank’s chairman and chief executive, said in a statement.
“We can’t change the economic environment, yet we have worked hard to control the variables we can – making our products and services more relevant to individuals and businesses, focusing on the customer, making as many loans as possible and growing new relationships – as well as fostering longtime ones.”
Unlike peers JPMorgan Chase, Bank of America and Citigroup, Wells Fargo is one of the few banks in the 24-lender KBW Bank Index trading above book value.
The lender spent about $1.8bn repurchasing 28m shares of common stock, 6m of which will settle in the fourth quarter, and another $1.9bn for its $0.12 dividend a common share. Its estimated tier one common equity capital ratio under the new Basel III accords is pegged at 7.41 per cent, the bank said.
Wells Fargo is the second of the largest US lenders to report earnings this season. Last week, JPMorgan failed to impress investors with a $4.3bn third-quarter profit on flat growth and gloomy guidance for the near-term.
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