Wells Fargo & Co., while bruised by California's slumping housing market, increased revenue by capitalizing on recent acquisitions in its insurance business and growing demand in the agriculture sector to beat analysts' second-quarter earnings expectations.
The San Francisco company reported this morning that net income fell 23% from a year earlier, to $1.75 billion, or 53 cents a share. But it beat the consensus forecast of analysts polled by Thomson Reuters by 3 cents a share, crediting a 16% jump in revenue, to $11.5 billion, driven in large part by its fast-growing insurance division.
"We are open for business and getting lots of it," said John G. Stumpf, Wells Fargo president and CEO. "We also continued to benefit from opportunities in this environment to gain new business and customers through selective acquisitions."
In a show of strength, Wells raised its quarterly dividend by 10%, to 34 cents a share.
Wells said insurance fees increased 27% from a year earlier, thanks to a string of small acquisitions over the past year. Most recently, in May, Wells bought Flatiron Credit Co. in Denver, allowing it to enter the insurance premium finance business. Wells, the nation's largest private agriculture lender, also credited strong demand for crop insurance.
Increased revenue levels helped to minimize the impact of troubles tied to weak housing markets. Wells, which has struggled with rising defaults in its home-equity portfolio, quadrupled its provision for credit losses from a year earlier, to $3 billion, and reported that net chargeoffs more than doubled, to $1.5 billion. Nonperforming assets nearly doubled to $5.2 billion.
But Stumpf said the company remains well-capitalized and on solid footing to continue growing revenue this year. Its Tier 1 capital ratio rose to 8.24% from 7.92% at the end of the first quarter. Net interest margin rose to 4.92% from 4.89% a year earlier and from 4.69% at the end of the first quarter.