Refi Surge Kick Starts Record Q1 Wells Fargo Profit

Wells Fargo has reported that net income increased to $4.25 billion in the first quarter of 2012, from $3.76 billion in Q1 of 2011. The company reported a a 42% increase in income from its mortgage-banking business year-over-year, at $2.9 billion, up $506 million from the fourth quarter of 2011, on $129 billion in originations, compared to $120 billion in originations in Q4, due primarily to homeowners nationwide taking advantage of record-low interest rates which remain below the four percent mark. Wells Fargo provided $430 million for mortgage loan repurchase losses, compared with $404 million in Q4 of 2011 (included in net gains from mortgage loan origination/sales activities). Net mortgage servicing rights (MSRs) results were a $58 million loss compared with a $201 million gain in fourth quarter 2011. “Wells Fargo delivered outstanding first quarter results driven by strong revenue growth. Quarterly revenue was the highest in nine quarters, and we achieved our ninth consecutive quarter of earnings per share growth,” said Wells Fargo Chairman and CEO John Stumpf. “Our continued performance for shareholders through a variety of economic environments is a testament to our diversified business model." Credit quality also improved at Wells Fargo, with net charge-offs for consumer real estate loans declining to $791 million, or 1.39 percent of average loans on an annualized basis, from 844 million, or 1.46 percent in the prior quarter. “Credit quality continued to improve in the first quarter,” said Chief Risk Officer Mike Loughlin. “We have seen significant improvement in credit performance over the past two years, and expect continued but slower improvement this year as losses approach a stable, more normalized level. Absent significant deterioration in the economy, we continue to expect future reserve releases in 2012.”