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Bank of America's 4th-quarter profit rises

Three of the biggest U.S. banks, led by Bank of America Corp., reported record quarterly profits on Tuesday as consumers and companies borrowed more and credit quality improved.
/ Source: Reuters

Three of the biggest U.S. banks, led by Bank of America Corp., reported record quarterly profits on Tuesday as consumers and companies borrowed more and credit quality improved.

Bank of America, the No. 3 U.S. bank, said net income rose 41 percent. No. 5 Wells Fargo & Co. posted a 10 percent increase, and No. 8 National City Corp. reported a 76 percent jump.

U.S. Bancorp, the No. 6 bank, said profit rose 8 percent, while No. 9 Fifth Third Bancorp and No. 10 State Street Corp. reported lower earnings.

“Loan growth looks good, and fee revenue is surpassing my expectations,” said Hilary Hayes, a portfolio manager at Victory SBSF Capital Management in New York. “The consumer is still doing OK.”

Consumers are taking on more debt as the economy expands, though borrowing growth is slowing. Banks are also benefiting from rising stocks and increased investment banking activity, and corporate customers are borrowing more to fund expansion. This helps offset the slowdown in mortgage refinancing demand.

“Banks with well-balanced business mixes, and exposure to many areas such as capital markets and asset management, will probably benefit more than companies with large exposure to mortgage banking,” said Mark Batty, an analyst at PNC Advisors Inc. in Philadelphia.

Among the big banks reporting quarterly earnings, only State Street saw its shares decline.

No. 2 bank J.P. Morgan Chase & Co. and No. 4 Wachovia Corp. are expected to report quarterly results on Wednesday.

No. 2 bank J.P. Morgan Chase & Co. and No. 4 Wachovia Corp. are expected to report quarterly results on Wednesday. No. 1 Citigroup Inc. is due on Thursday.

Bank of America, Wells Fargo
Bank of America said profit rose to $3.85 billion, or 94 cents per share, from $2.73 billion, or 92 cents per share, a year earlier.

Excluding one-time items, profit totaled 98 cents per share, 4 cents above the average forecast among analysts polled by Reuters Estimates. Revenue rose 42 percent to $13.9 billion.

Chief Executive Kenneth Lewis said the Charlotte, North Carolina-based bank remains “on schedule” in integrating FleetBoston Financial Corp., which it bought for $48 billion last April.

He also forecast a 2005 profit of at least $4 per share, up from $3.69 in 2004, with a 7 percent to 9 percent increase in revenue, despite the challenges of managing volatile interest rates and integrating Fleet systems in the U.S. Northeast.

Profit totaled $1.76 billion from consumer and small-business banking, $887 million from commercial banking, $477 million from wealth and investment management, and $596 million from the investment bank.

Wells Fargo, based in San Francisco, said profit rose to $1.79 billion, or $1.04 per share, from $1.62 billion, or 95 cents per share.

Analysts on average expected $1.06 per share. Revenue rose 10 percent to $8.17 billion.

Chief Financial Officer Howard Atkins said Wells Fargo is benefiting from selling multiple products to each customer. Wells Fargo consumer clients own, on average, 4.6 products each, up from three in 1998.

“We still see the consumer as being relatively strong,” Atkins said in an interview.

Profit rose 5 percent in retail banking to $1.24 billion, and 5 percent in wholesale business banking to $403 million. Wells Fargo Financial profit, including consumer finance and credit cards, rose 8 percent to $129 million.

The No. 2 U.S. mortgage lender also said mortgage originations fell 37 percent last year to $298 billion as the refinancing boom ended.

Others
U.S. Bancorp said profit rose to $1.06 billion, or 56 cents per share, from $977 million, or 50 cents, helped by fee income growth and fewer bad loans. Moody’s Investors Service raised the bank’s debt rating to “Aa2,” its third highest grade, citing U.S. Bancorp’s “superior core profitability.”

National City said profit rose to $960 million, or $1.46 per share, from $544 million, or 88 cents. Excluding a one-time gain, profit was 72 cents per share; analysts expected 66 cents.

Fifth Third said profit fell 60 percent to $176 million, or 31 cents per share, from $442 million, or 77 cents, as it restructured its balance sheet to prepare for rising rates. Analysts expected 29 cents a share.

State Street, the world’s biggest institutional asset manager, said profit fell 59 percent to $184 million, or 55 cents per share, from $447 million, or $1.33, in part because of costs for job cuts.

U.S. Bancorp is based in Minneapolis, National City in Cleveland, Fifth Third in Cincinnati and State Street in Boston.