SAN FRANCISCO -- Wells Fargo posted record profit of $5.27 billion in the second quarter that were up 19.7 percent from the year before, bolstered by robust earnings in its mortgage business that improved despite rising interest rates, the bank reported Friday.

During the April-June quarter, San Francisco-based Wells Fargo posted revenue of $21.4 billion, up 1 percent from the year-ago second quarter.

"Our results reflected the strength of our diversified business model," said Wells Fargo CEO John Stumpf. "Compared with the prior quarter, we grew loans, deposits and net interest income."

The results topped Wall Street's expectations. Shares of Wells Fargo jumped 1.8 percent and closed at $42.63, just shy of a 52-week high.

The logo for Wells Fargo bank is pictured in downtown Los Angeles, California July 17, 2012. REUTERS/Fred Prouser
The logo for Wells Fargo bank is pictured in downtown Los Angeles, California July 17, 2012. REUTERS/Fred Prouser ( © Fred Prouser / Reuters )

"Wells Fargo is doing a great job of managing the bottom line," said Michael Yoshikami, president of Walnut Creek-based Destination Wealth Management. "They have constantly increased their quarterly profits. That is impressive."

Per-share profit was 98 cents, compared with a prediction of 93 cents. Revenue also topped analysts' projections.

"None of the other major banks are in a position to benefit from the housing recovery to the extent that Wells Fargo can benefit," said Ken Thomas, a Miami-based independent bank analyst and operator of BranchLocation.com.

The bank said the quality of its loan portfolio improved during the quarter.


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"Consumer loss levels have improved rapidly due primarily to the positive momentum in the residential real estate market," Chief Risk Officer Mike Loughlin said.

Nonperforming assets such as bad loans totaled $21.1 billion, down 7.8 percent from the year-ago quarter. Foreclosed assets totaled $3.1 billion, down 8.8 percent.

Originations for home mortgages totaled $112 billion in the second quarter, up 2.8 percent from the year before.

Wells Fargo executives said the economy is clearly on the mend.

"We continue to be optimistic about the improvements we're seeing throughout the economy," Stumpf told analysts during a conference call Friday to discuss the results. "While commercial loan demand is still modest, jobs are being created, consumer confidence is increasing and the housing market continues to demonstrate strong momentum."

The bank accounts for one out of three residential mortgages in the United States -- which presents opportunities as well as challenges.

"Wells Fargo does have some issues, because they have a large residential real estate exposure in California," Yoshikami said. "They have the challenge of rising interest rates, which could slow home loan lending. But overall, this is a solid report. It shows Wells is executing on its game plan."

Contact George Avalos at 408-373-3556 or 925-977-8477. Follow him at twitter.com/george_avalos.