Wells Fargo sees profit hit record $3.05 bln


July 15, 2010 Updated Apr 22, 2009 at 3:03 PM CDT

US banking group Wells Fargo said Wednesday it earned a record profit of 3.05 billion dollars in the first quarter following its acquisition of struggling rival Wachovia.

"The best way to generate capital is to earn it," said Wells Fargo president and chief executive John Stumpf.

"This has long been the hallmark of our company and we're now seeing the initial signs of the earnings and capital-generating power of the combined Wells Fargo-Wachovia in our first quarter together, serving one of every three US households."

The profit amounted to 56 cents per share, topping Wall Street estimates of 41 cents per share and in line with the company's update earlier this month.

The improved results for the banking sector have offered a glimmer of hope to a recession-ravaged economy squeezed by tight credit, although some analysts say the sector's better earnings reflect accounting gimmickry.

The San Francisco, California-based bank said revenue grew to 21.0 billion dollars including double-digit increases at the former Wells Fargo operations and "a strong contribution from Wachovia," which generated 41 percent of combined revenue.

It said its net interest margin was 4.16 percent, "highest among large bank peers," as deposits rose six percent to 756.2 billion dollars as of March 31.

Wells Fargo said it was "well-positioned" for a difficult environment with an allowance for credit losses of 22.8 billion dollars.

Two weeks earlier, Wells Fargo predicted the record earnings, fueling a massive rally in the banking sector that is seen as critical to an economic recovery.

Wells Fargo said it paid out preferred dividends of 661 million dollars, including 372 million to the US Treasury for its capital injection under a program to shore up the US banking system.

Shares in Wells Fargo rose 3.2 percent to 19.42 dollars in early afternoon trade.

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