NEW YORK (AP) — A steadier mortgage business, higher commercial lending and an increase in deposits lifted Wells Fargo & Co.'s (WFC) fourth-quarter profit by 20%. The San Francisco-based bank reported Tuesday that the amount of mortgages it wrote in the last three months of 2011 jumped 35% compared with the third quarter, to $120 billion.
Editor's Note: Wells Fargo Advisors said it had client assets of $1.1 trillion as of Dec. 30, unchanged from Q3; it also had 15,263 financial advisors (up 75 from three months ago), 11,119 of whom are in the traditional brokerage channel (representing a jump of 39 from the previous quarter). WFA is part of the wealth, brokerage and retirement unit, which had net income of $325 million in Q4 vs. $291 million in Q3 and $197 million in the year-ago period.
Overall loan balances rose to $769.6 billion, up 2% from a year ago. Wells Fargo, which is the largest consumer lender in the U.S., reported a 2% increase in commercial loans, to $5.6 billion, reflecting both direct lending and the purchase of portfolios from other lenders.
Most of that growth came from new business, Chief Financial Officer Tim Sloan said in an interview. "We've been seeing good opportunities to grow the commercial loan business for a long time," he said. "We think there's a lot of opportunity there, and we think it will continue."
Commercial loans now make up 40% of Wells' overall portfolio, helping to balance out its income and spread its risk.
The bank also benefited as more of its customers paid their bills on time. Wells Fargo wrote off $2.6 billion in loans as uncollectible, including $2.17 billion in consumer loans. That was down from $3.84 billion last year, but did represent a slight increase from the third quarter.
"That's something we're going to watch," said Paul Miller, an analyst with FBR Capital Markets. While the figure shows gains from a year ago, he said, the improvements in overall credit quality slowed down considerably toward the end of the year, he said.
Loans considered past due and likely to default ended the year at $25.6 billion, compared with $32.4 billion last year.
The improvement in Wells Fargo's loan portfolio allowed the bank to release $600 million from its reserves to cover uncollected loans. That money flowed directly to the bank's bottom line.
Wells Fargo's net income for the quarter rose to $4.11 billion, or 73 cents per share, compared with $3.41 billion, or 61 cents per share, in the year-ago period. Revenue slipped 4% to $20.61 billion from $21.49 billion a year earlier.
Analysts, on average, were expecting profit of 72 cents per share, on total revenue of $20 billion, according to data provided by FactSet.
The results contrasted with other major banks, particularly Citigroup Inc., which posted disappointing results early Tuesday. Citi and other large banks depend more heavily on Wall Street trading operations and overseas business, and were stung during the quarter by market volatility and the European debt crisis. Wells, whose business is concentrated in the U.S., benefited from the slowly improving domestic economy and a brighter consumer outlook.
