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Wells Fargo profit rises 9% on fees

July 18, 2007|From the Associated Press

Wells Fargo & Co. raked in more customer service fees and sold more products to boost its second-quarter profit 9%, sticking to a familiar formula that paid off even as more households struggled to pay their bills.

The San Francisco-based bank said Tuesday that it earned $2.28 billion, or 67 cents a share, during the April-June period. That compared with net income of $2.09 billion, or 61 cents, a year earlier.

Revenue climbed 13% to $9.89 billion, the bank's biggest quarterly increase in nearly two years. The earnings matched the average estimate among analysts surveyed by Thomson Financial.

Wells Fargo shares gained 14 cents to $35.59.

The results provided investors with their first look at how major banks fared during the spring -- a period marked by more loan problems as rising interest rates, declining home values and higher gasoline prices drained consumer budgets.

The trouble has been especially acute among so-called sub-prime borrowers, who bought homes during the last few years by relying on risky, adjustable-rate loans because they either had tarnished credit records or didn't make enough money to qualify for more traditional mortgages.

Without providing a specific breakdown, Wells Fargo said its sub-prime mortgages are held in a $22-billion portfolio of "debt consolidation" loans. The bank said it lost $10 million in this segment during the second quarter.

Wells Fargo management believes it is better positioned to avoid major sub-prime headaches because it demanded more paperwork to verify the incomes of borrowers and eschewed the exotic loans that have devastated other lenders.

More of its customers are missing payments on home-equity loans, the bank said, a trend that management expects to add to Wells Fargo's loan losses this year.

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