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Wells Fargo, Golden West Post Gains in Third-Quarter Profits

The banks cite growth in consumer lending and increased revenue from mortgage lending for improved earnings.

October 22, 2003|E. Scott Reckard | Times Staff Writer

Wells Fargo & Co., the largest California-based bank, reported 8% higher third-quarter profit Tuesday, citing growth in all types of consumer lending, rising income from fees and higher levels of deposits paying little or no interest.

At Oakland-based Golden West Financial Corp., rising rates on conventional home loans helped to boost business in adjustable-rate loans, the specialty of the firm's World Savings Bank. Golden West's earnings were up 16% in the quarter.

San Francisco-based Wells Fargo, the nation's No. 1 mortgage lender, earned $1.56 billion, or 92 cents a share, compared with $1.44 billion, or 84 cents, in the third quarter of 2002.

Its after-tax profit was reduced by $171 million, or 10 cents a share, as the bank cut some costs, renegotiated contracts and sold some bonds. Analysts on average had forecast a profit of 93 cents a share.

Wells Fargo shares rose 13 cents Tuesday to close at $55.50 on the New York Stock Exchange.

Revenue rose 19% to $7.17 billion from $6.04 billion a year earlier, with 58% of that growth attributable to residential mortgage banking, Chief Financial Officer Howard Atkins said.

Results also improved in consumer lending, credit cards and trust and wealth-management services, thanks to a rising stock market and Wells Fargo's hiring of additional private bankers.

"Basically all the consumer lending products continued to show good growth," Atkins said in an interview.

Income from lending was up 14%, while noninterest income, the category including fees and gains on sales of securities, increased 26% over the third quarter of 2002. Fees for deposit services, credit cards and credit lines all rose strongly, Atkins said.

Revenue at Wells Fargo Financial, an Iowa-based business focused on lending to consumers with credit blemishes, rose by 20% from the year-earlier quarter, while operating profit was up 32% to $121 million.

So-called core deposits, which include mortgage escrow accounts as well as checking, savings and money market accounts, grew by $31 billion, or 17%, year over year.

Recent Federal Reserve statistics showed that the trend of money flowing into low-paying but safe bank accounts may be reversing. Wells Fargo's chief executive, Richard Kovacevich, said the company hoped to capture money going back into the stock market through its own brokerage services, offsetting any decline in deposits.

Golden West earned $282.9 million, or $1.83 a share in the quarter, up from $244.5 million, or $1.56, during the third quarter of 2002. The old-fashioned savings and loan, focused on issuing certificates of deposit and making adjustable-rate mortgages, originated a total of $10.1 billion in loans during the quarter, up 50% from a year earlier.

Golden West said income from sources other than lending jumped to $91 million from $58 million, largely as a result of higher gains on sales of fixed-rate mortgages.

The company's shares added 66 cents to $95.76 on the NYSE.

In other bank earnings:

* L.A.-based Nara Bancorp, whose Nara Bank focuses on the Korean American community, said third-quarter earnings rose to $3.7 million from $3.1 million, a 19% gain.

* BancWest Corp., parent of San Francisco-based Bank of the West, reported that third-quarter net income rose 15.6% to $112.2 million.

Reuters was used in compiling this report.

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