(Bloomberg News) Wells Fargo & Co., the biggest U.S. home lender, boosted second-quarter profit 29 percent to a record as funds set aside to cover soured loans declined for a seventh straight period.
Net income climbed to $3.95 billion, or 70 cents a diluted share, from $3.06 billion, or 55 cents, in the same period a year earlier, the San Francisco-based company said today in a statement. The average estimate of 26 analysts surveyed by Bloomberg was for earnings per share of 69 cents.
"We're seeing continued improvement in asset quality trends," Andrew Marquardt, an analyst at Evercore Partners Inc. in New York, said in an interview before the results were announced. "Wells Fargo is in a uniquely strong position where they have addressed a lot of the issues on their balance sheet."
Wells Fargo Chief Executive Officer John Stumpf, 57, is relying on loan-loss reserves and cost-cutting to boost profit as a jobless rate above 9 percent has tempered the U.S. economic recovery. Consumer borrowing rose in May for the eighth straight month, a sign that people may be ramping up credit-card debt as gasoline prices and unemployment climb.
"Our business fundamentals were strong with increased revenues, loans and deposits, lower operating costs, improved credit quality and higher capital levels," Stumpf said in the statement. "While the economic recovery continues to be slower than expected, there are signs that businesses are investing for growth."
Revenue rose 0.3 percent from the first quarter to $20.4 billion, matching analysts' estimates. Pretax, pre-provision income advanced 4 percent to $7.91 billion, compared with the preceding three-month period. Total loans climbed $766 million to $751.9 billion as of June 30.
Wells Fargo set aside $1.8 billion to cover loan losses, on net loan write-offs of $2.8 billion.
Bank lending has picked up for businesses and corporations as well, Federal Reserve data show. U.S. commercial banks' holdings of commercial and industrial loans rose to $1.26 trillion in May, a 1 percent increase from the previous month.
Wells Fargo, the fourth-biggest U.S. bank by assets, advanced 1.6 percent to $27.30 at 8:49 a.m. in early New York trading. The shares had declined 13 percent this year through yesterday, mirroring the drop of the 24-company KBW Bank Index.
Warren Buffett's Berkshire Hathaway Inc., Wells Fargo's largest shareholder, held 342.6 million shares, a 6.5 percent stake, as of March 31.