Profit increases for Wells Fargo on higher lending- WFC

Northern, WI 1/12/2013 (WallstreetPr) –The last quarter of the previous year has been great for the largest home lending agency, Wells Fargo & Co. (NYSE:WFC), which witnessed a 24% increase in profits during this period though towards the end there was a minor dip in share value owing to decline in home loan applications. The bank which is based in San Francisco saw a whopping 7 % increase in revenues amounting to $ 21.9 billion which more than the expenses of 3% through non interest sources. The economic revival which has started in the last fiscal coupled with the bank’s smart policy of leveraging the deposits has helped increase in loan disbursements that have ultimately made the policy profitable even with narrower margins. The results have been contrary to the sombre predictions of more than 27 analysts.

The Trend Ahead

By the end of the year however the origination had dropped to $125 billion which is a string indicator of decline in business for the first quarter of 2013. Thus the CEO of Wells Fargo & Co. (NYSE:WFC) has indicated that lending is likely to see some degree of marginalization during this period. Having released more than $250 million from the reserves into the loan segment the bank now is planning to apply to the Federal Reserve for letting it return more money to the shareholders. This is also being viewed as a ploy by the bank to buy back the common shares and raise the dividend which it is paying at the rate of 22 cents currently amounting to 2.5% annually. Wells Fargo & Co. (NYSE:WFC) is also in the process of providing some major aid to the mortgagers that supervise loan approvals and foreclosures. The mortgagers are yet to recover completely from the sub-prime crisis.

Forecast for Mortgage Business

There has been a great degree of recovery in this segment which has seen unprecedented increase in the last fiscal alone. Wells Fargo & Co. (NYSE:WFC) is confident of harnessing the conditions to its advantage. However mortgage finance is not likely to be a hugely profitable segment in this year and the total investment of the bank in this direction may have to be reconsidered as the year progresses. The real gold lies in investment banking with commercial and corporate customers which is going the focus area for the bank in 2013. Additionally the bank has been expanding its presence in the securities segment with greater emphasis on better customer service and client benefits.

Shares of Wells Fargo & Company (NYSE: WFC) were down by 0.85% to close at $35.10

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Published by Viraj Shah

Viraj Shah has done M.Com (Finance) and currently pursuing CFP. He is a technical analyst who tracks US markets along with other global markets like India very closely. He is very passionate about stocks and believes that money can always be made in market.

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