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Wells Fargo posts 1Q results in line with forecast

April 23, 2009|E. Scott Reckard

Wells Fargo & Co., confirming that its profit jumped 52% to $3.05 billion in the first quarter despite the deep recession, said its mortgage volume had surged so much that the San Francisco bank was hiring 5,000 workers to help handle the load.

The company originated 450,000 home loans in the first three months of the year, nearly twice the number in the fourth quarter of 2008.

Most of those mortgages -- 75% to 80% -- were made to borrowers refinancing existing loans to take advantage of rock-bottom interest rates. Bank of America Corp., which also is hiring 5,000 people to keep up with the demand, has reported similar percentages.

Wells Fargo, the country's largest mortgage lender, said it was encouraged by the fact that 20% to 25% of its home-loan customers were actually buying homes.

"It's premature to say the economy has bottomed out," said Howard Atkins, the company's chief financial officer. "But clearly there are signs that indicate to me we are closer to the bottom.

"Some of that is in the housing sector," he added, "even in California."

Even though half of the homes currently sold in the Golden State involve foreclosures, Atkins said, those sales are having a positive effect by reducing the number of properties on the market.

And because California's housing market collapsed earlier than those of many other states, "it will come out earlier," Atkins said. "New York is definitely still declining."

Wells Fargo said it earned $3.05 billion in the first quarter, compared with $2 billion a year earlier.

After accounting for the payment of preferred dividends, including $372 million in required payments on a $25-billion capital infusion from the U.S. Treasury, the profit available to common shareholders amounted to 56 cents a common share in the latest quarter, down from 60 cents a year earlier. An increase in the number of common shares outstanding also contributed to the drop in per-share profit.

The profit was in line with an estimate released by Wells Fargo on April 9 that sent the company's stock up 32% that day to $19.61 a share.

After Wells reported its results early Wednesday, the stock initially surged as high as $20.56 but closed down 63 cents at $18.18.

Revenue for the quarter totaled $21 billion, including $1.6 billion in revenue from mortgage loan originations and sales on $101 billion in new-home loans. The operations of Wachovia Corp., which Wells Fargo bought last year, accounted for 41% of total revenue. Excluding the former Wachovia operations, Wells Fargo said its revenue jumped 16% to $12.3 billion. The company had $100 billion in pending mortgages in its pipeline at the end of the first quarter, up 41% from the previous quarter.

Atkins said that given the backlog of pending home loans, the 5,000 extra mortgage employees that are being hired should be kept busy at least through the end of this quarter.

Julia Tunis Bernard, a Wells Fargo spokeswoman, declined to say where the new mortgage jobs would be except that they "would be dispersed throughout the country."

On Monday, Bank of America made a similar announcement, saying its 5,000 newly hired mortgage employees would work mostly at call centers across the country, including in Simi Valley.

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