Wells Fargo Boasts Record Year for Profits, Mortgage Lending
Wells Fargo posted record revenue and profits in 2006, despite a slowdown in the growth of its mortgage lending business.
The company reported Tuesday that fourth-quarter profits were up 13 percent from last year, to $2.18 billion, or 64 cents per share. Profits for the year were up 11 percent to $8.48 billion, on record-setting revenue of $35.7 billion.
These figures arrive despite a $704 million drop in annual revenue from residential mortgage lending, to $4.2 billion. Mortgage lending generated $1 billion in revenue in the fourth quarter, down $116 million from the same time a year earlier.
One reason for the decline was that Wells Fargo took a $250 million loss on the sale of $26 billion in adjustable-rate mortgages and other loans in the second quarter. The bank said at the time that the sale was undertaken “to further improve long-term earning asset yields.”Wells Fargo originated $398 billion in mortgage loans in 2006, up 9 percent from 2005.
But fourth-quarter residential real estate originations of $87 billion were a low for the year - down 16 percent from the third quarter and off 23 percent from the same quarter a year ago.
The $1.37 trillion mortgage servicing portfolio at the end of the year represented a 38 percent increase from the year before, the company said, and the company had $48 billion in mortgage applications in the pipeline, compared with $50 billion at the end of 2005.
Overall credit quality remains “in line with our expectations,” said Chief Credit Officer Mike Loughlin, with all loan portfolios outside of auto performing “at or better than expectations.”
Fourth-quarter net credit losses were $726 million, or .92 percent of average loans on an annual basis, compared with $663 million (.86 percent) in third-quarter 2006 and $703 million (.91 percent) in fourth-quarter 2005.
“We saw a modest increase in residential real estate losses from very low run rates,” Loughlin said. “We continued to be satisfied with the performance of our residential first- and second mortgage portfolios.