Boston, MA 04/15/2013 (wallstreetpr) – The largest U.S home lender, Wells Fargo & Co (NYSE:WFC) (Closed: $37.21, Down by 0.80%) said that lowering its expenses had helped the company in posting record profits in its first quarter, despite the fact that there had been a drop in revenue and the lending margins had narrowed. According to a statement from the bank, the net income had increased to a record $5.17 billion, by 22 percent or 92 cents per share. This has stood at 75 cents per share and $4.25 billion, a year earlier.
Market condition helped raise profits
Though the results had exceeded analyst estimates, there had been a drop in mortgage banking income and home loans and the shares had dipped by 2.3 percent. The drop in demand for consumer and corporate loans had prompted John Stumpf, the Chief Executive Officer to focus on reducing expenses. Costs linked to foreclosures and faulty mortgages had been on the decline as housing prices had rebounded. This has helped the 59-year-old Stumpf to seek more revenue from the mortgage business which accounted for one out of three U.S loans in 2012. A prominent analyst said that when revenues are under so much of pressure, people want to see what measures banks are taking to control their expenses.
According to the bank, its revenue had dropped to $21.3 billion after a 1.7 percent drop. The net interest margin had narrowed by 8 basis points to 3.48 percent, from its fourth quarter. Wells Fargo had made-up by bringing its non-interest expense down by $12.4 billion which was a dip of 5 percent and it released reserves of $200 million as the bank’s loan losses eased. The community banking division’s quarterly profit rose to $2.92 billion with a 25 percent rise from a year earlier. This includes the mortgage and branch network business. The wholesale banking business’ net income rose to $2.05 billion after rising 9.5 percent and the wealth and brokerage unit’s earnings rose to $337 billion after climbing 14 percent.
Stumpf has promised to direct more capital to the bank’s shareholders. Last month, he received approval to hike the quarterly dividend from 25 cents to 30 cents and promised additional stock buybacks as well.