October 5, 2022

DealBook: Wells Fargo Fourth-Quarter Profit Up 20%

Wells Fargo, the nation’s largest consumer lender, said on Tuesday that its fourth-quarter earnings rose 20 percent, an indication the bank was coping with a lackluster economy and an anemic banking industry.

The bank, based in San Francisco, turned a $4.1 billion profit in the fourth quarter, or 73 cents a share, as its loan portfolio showed signs of improving and its deposit division continued to grow. That compared with a profit of $3.4 billion, or 61 cents a share, in the period a year earlier. The figures, which were aided by Wells Fargo’s lack of exposure to the volatile investment banking business, exceeded analysts’ consensus estimate of 72 cents a share.

The strong fourth-quarter results helped the bank to a $15.9 billion profit in 2011, up 28 percent from 2010, when the bank earned $12.36 billion.

“I’m extremely pleased with Wells Fargo’s performance in 2011 – including strong deposit and loan growth, record cross-sell and record earnings,” John G. Stumpf, the bank’s chairman and chief executive, said in a statement.

Investors responded well to the report, sending the bank’s shares up slightly in premarket trading.

But the profit gains at Wells Fargo were limited by declining revenue, reflecting a setback felt across the banking industry as a result of the sluggish economic recovery. A new round of federal regulations also continued to weigh on revenue at banks.

Wells Fargo’s fourth-quarter revenue fell to $20.6 billion from $21.5 billion in the period a year earlier. For the year, the bank posted $80.9 billion in revenue, dropping from $85.2 in 2010.

Wells Fargo and its fellow big banks are struggling to recoup precious revenue lost to a new rule that limits fees they can charge merchants when a consumer uses a debit card. The rule, known as the Durbin amendment, after its sponsor Senator Richard J. Durbin, Democrat of Illinois, is expected to cost banks hundreds of millions of dollars every quarter.

“The Durbin hit is real money,” said Brian Foran, a senior analyst with Nomura, who cautioned that banks were unlikely to reverse their revenue woes anytime soon. “We’re not going to get that inflection point in 2012.”

Article source: http://feeds.nytimes.com/click.phdo?i=23a992c92384f76d34744dc5f75c95cb

Starbucks’s Profit Gains 20%

The company said it earned $261.6 million, or 34 cents a share, for the quarter, which ended April 3, meeting analysts’ average expectations. The profit was up from $217.3 million, or 28 cents a share, a year earlier.

Revenue rose nearly 10 percent to $2.79 billion, beating expectations for $2.73 billion, according to FactSet.

Starbucks said the underlying health of its business had never been better, despite the challenges of higher costs and a weak economy. The results showed the company’s strength.

The company, based in Seattle, now expects to earn $1.46 to $1.48 a share for the year, up from $1.44 to $1.47 a share.

But that is just short of Wall Street’s average forecast for $1.49 a share, and Starbucks shares dipped 69 cents, to $35.92, in after-hours trading.

The company said the new forecast accounted for a still bigger increase in commodity costs than it foresaw in January. It now says those rising costs will cut earnings for the year by 22 cents a share, up from 20 cents a share. The 2-cent difference reflects an expectation that dairy and fuel costs will keep rising, Starbucks said.

Article source: http://feeds.nytimes.com/click.phdo?i=1153027bbd69ff563b948eaac8895069