Wells Fargo & Co. on Wednesday reported a $2.6 billion third-quarter profit as the company's retail banking operations, including the loan business it acquired with the purchase of Wachovia Corp., offset its rising loan losses.
San Francisco-based Wells Fargo joined other big banks in reporting continuing heavy losses from failed loans. Well Fargo said credit losses climbed to $5.1 billion, or 2.5 percent of its loan portfolio. That is up from $2 billion a year ago and $4.4 billion in the second quarter.
Unlike its retail banking peers, however, Wells Fargo was profiting from it traditional banking operations, which includes the big mortgage business it took on when it bought Wachovia at the height of the credit crisis a year ago. Wells Fargo reported interest income of $5.57 billion after accounting for $6.1 billion in credit losses, which includes the loan losses and adding more money to its loan loss reserves.
The increase in loan losses follows the pattern at other top U.S. banks, including Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. Those banks' results, however, were supported by their robust trading businesses. Wells Fargo has a relatively small trading operation.
Wells Fargo also offered a more upbeat outlook than some of the other banks, saying it expects credit losses to peak in 2010, with consumer losses possibly even peaking by the first half of the year.
The fourth-largest U.S. bank reported a third-quarter profit of $2.64 billion, or 56 cents per share, after paying preferred dividends, up from $1.64 billion, or 49 cents per share, a year ago. Analysts, on average, were expecting earnings of 37 cents per share.