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Wells Fargo Profit Rises 5% Amid Mortgage Surge

Earnings: Report sends stock up sharply. The amount borrowed from the bank for home loans is triple a year earlier.

January 16, 2002|From Times Wire Services

Wells Fargo & Co. said fourth-quarter profit rose 5% as lending to home buyers jumped when mortgage rates declined to the lowest level in 30 years.

Net income at the fifth-largest U.S. bank rose to $1.18 billion, or 69 cents a share, from $1.13 billion, or 65 cents, in the same period last year. Revenue increased 9% to $5.8 billion. Shares of Wells Fargo rose $2.30, or 5.3%, to $45.32 on the New York Stock Exchange.

Wells Fargo, which serves about 20 million households, has "done a very strong job of staying with its bread-and-butter businesses," said James Ellman, who manages $250million in a financial services company portfolio at Merrill Lynch Investment Management.

The San Francisco company benefited from a rise in mortgage and consumer borrowing after the Federal Reserve cut interest rates 11 times to spur the economy.

Wells Fargo reduced earnings by a total of $28 million because of Enron Corp.'s bankruptcy and the financial collapse of Argentina.

Wells Fargo lent $38 billion for mortgages in the quarter, more than triple the amount in the year-earlier period. Net interest income, or what the bank makes from lending, rose 23% to $3.45 billion from last year.

"We're still in a relatively favorable interest rate environment, which is driving mortgage gains," said Michael Holton, an analyst at T. Rowe Price & Associates, which owns 7.2 million Wells Fargo shares.

Loans the bank doesn't expect to be repaid rose to $1.64 billion, up 37% from the year-ago quarter. Still, the amount was almost unchanged from $1.62 billion in the third quarter.

Other financial institutions reporting earnings, excluding one-time gains or charges unless noted:

* Golden State Bancorp Inc. said profit rose 22% as customers increased deposits and paid for more transactions at its California Federal Bank. Net income at the San Francisco-based savings and loan rose to $109.2 million, or 76 cents a share, from $89.3 million, or 63 cents, a year earlier.

* Mellon Financial Corp., owner of the Dreyfus mutual funds, said profit more than tripled on a gain from the sale of its 132-year-old retail banking operation. Net income at the Pittsburgh financial company rose to $807 million, or $1.70 a share, from $255million, or 52 cents, a year earlier.

* Northern Trust Corp. reported net income fell 18% to $102.4 million, or 45 cents a share, from $125.5 million, or 54 cents a share, a year earlier. The Chicago bank said it had $43.5 million in outstanding Enron-related loans, of which $24.6 million was unsecured and written off.

* Washington Mutual Inc. reported profit rose 69% to a record high, as lower interest rates spurred a boom in home loans. The Seattle-based thrift earned $842 million, or 97 cents a share, in the fourth quarter, compared with $497 million, or 62 cents a share, in the 2000 quarter.

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