Wells Fargo & Co. sparkled Friday as disappointing earnings at JPMorgan Chase & Co. added to Wall Street’s sell-off.
San Francisco-based Wells Fargo reported strong first-quarter profit growth despite sliding revenue. It got a bump from a one-time tax benefit and moved a sizable sum out of its reserves for future bad loans.
Wells Fargo’s profits did their usual double-digit vault in the first quarter, this time rising 14 percent, or $1.05 per share, even as revenue of $20.6 billion dipped 3 percent from a year earlier, partly on much slower mortgage banking activity. The bank said it laid off 1,110 full-time mortgage employees in the first quarter as it adjusts to the new mortgage landscape.
Yet Wells Fargo, which operates the biggest bank in Minnesota and has a large mortgage operation in the Twin Cities, continues to slam out strong earnings despite challenges confronting the industry, including new regulations and difficulty growing loans. Trust and investment fees, mostly brokerage advisory fees, card fees and strong gains on investment securities all helped power growth.
“Good quarter considering head winds,” was the quick take by Robert W. Baird & Co. Inc.
Wells Fargo saw broad-based loan growth, with average loans up 3 percent from a year earlier. That’s a slightly slower pace than in the previous quarter, but bank executives expressed optimism that loan volume will keep growing this year as the economy strengthens.
“The pipelines look good,” Chief Financial Officer Tim Sloan told analysts Friday.
The loan growth is a mix of taking market share and a better appetite for loans, Sloan later said on CNBC. “That to us indicates that the economy continues to slowly but surely increase, but it also means we’re taking share from our competitors,” he said.
Sloan becomes head of the bank’s wholesale banking group next month, succeeding David Hoyt, who is retiring. John Shrewsberry, the current head of Wells Fargo Securities, will be the new CFO.
The bank’s results stood in stark contrast to JPMorgan Chase, which is much more dependent than Wells Fargo on trading. Profit at the country’s largest bank dropped 18 percent, pushed down by slow trading in market-based assets such as fixed-income, currency and commodities. JPMorgan shares were down 3.7 percent Friday; Wells Fargo shares were up 0.8 percent.
Among the income drivers at Wells Fargo was its big “trust and investment fee” category, which is mostly advisory fees from its huge full-service brokerage. The category now generates twice the fees of the bank’s home loan business, and its income grew 7 percent from a year ago.
CEO John Stumpf hinted with analysts Friday that an acquisition for its wealth, brokerage and retirement segment is a possibility, as well as more portfolio purchases. Profit in the bank’s wealth, brokerage and retirement segment jumped 41 percent from a year earlier.