Wells Fargo sees 11% profit hike

Wells Fargo & Co. posted an 11% increase in first-quarter profit, resulting from growth in lending and a higher-net interest margin, which set off increasing credit losses. The San Francisco-based financial services company said net income rose to $2.24 billion, or 66 cents per share, up from $2.02 billion, or 60 cents per share in the year-ago period. Revenue increased 10% to $9.44 billion, compared to $8.56 billion during the year-ago period. Analysts surveyed by Reuters Estimates forecasted revenue of $9.31 billion on profit of 65 cents per share. Income from the mortgage banking business rose 90% to $790 million, compared to $415 million during the year-ago period. Mortgage applications increased 19% to $113 billion, while new mortgages increased 3% to $68 billion. The net interest margin rose to 4.95% from 4.85% in the year-ago period. Profit in the community banking business increased 27% to $1.53 billion from $1.21 billion in the year-ago period. Wells Fargo Financial, its subprime loan business, posted a 59% drop in profit to $114 million, compared with $280 million in the year-ago period. "We have tightened our underwriting standards and are focusing additional collections recourses on targeted portfolio segments," said chief credit officer Mike Loughlin, according to a statement. "We expect higher but manageable losses throughout 2007 in the home equity portfolio."