Wells Fargo Quarterly Net Off 23 Percent

Wells Fargo second-quarter net income declined by 23 percent, but still managed to beat earnings estimates and report growth in several business segments including insurance that saw double-digit growth.

As a whole, company net income dropped by $526 million to $1.75 billion compared with $2.8 billion for the period last year. Earnings per share decreased by 14 cents to 53 cents, exceeding analyst's expectations by 3 cents a share. Revenues rose $1.6 billion to $11.5 billion for the quarter.

In a recorded message, Howard Atkins, chief financial officer for San Francisco bank Wells Fargo, repeatedly used the term “growth” to describe the company's multiple financial platforms.

The company was hit with credit expenses of $3 billion, up from the $2.3 billion it recorded for the same period last year. He said part of the expense consisted of a $1.5 billion build-up in credit reserve.

For the six-month period, net income dropped $771 million, or 17 percent, to $3.75 billion. Earnings per share were down 20 cents to $1.13. Revenues increased by $2.7 billion to $22 billion.

Despite the charges, Mr. Atkins said Wells Fargo has “continued to grow our company's profitability at a time when many of our peers are losing money and shrinking.”

Wells Fargo's insurance segment, which includes its insurance brokerage business, reported revenues increased 27 percent, or $118 million, to $550 million for the quarter. For the six months, revenues are up 27 percent, or $223 million, to $1.05 billion.

Mr. Atkins said consumer and small-business insurance revenue grew 12 percent while its mid-market commercial achieved revenue growth of 27 percent.

He said the consumer and small-business segment was driven by sales of identity theft protection, debt cancellation and crop insurance products.

He said crop insurance still benefits from high commodity prices and an analysis of crop damage from recent floods “is not as widespread as it first appeared nor concentrated in counties and states where we had significant exposure.”

Because of this, the company will not be making any special provision for crop insurance losses, and management reminded listeners that the bulk of the risk is underwritten by reinsurers and the government.

The company also said it will pay a stock dividend of 34 cents a share, up from a previous payment of 31 cents, on Sept. 1 to shareholders of record as of Aug. 8.