Wells Fargo Beats Estimates but Card Charge-Offs Surge

Wells Fargo & Co., the second-largest mortgage lender in the U.S., said Wednesday that it recorded $2 billion in net income, or 60 cents per share, for the first quarter of 2008, an 11 percent decline from Q1 2007, but a total that beat analysts’ estimates by three cents.

San Francisco-based Wells Fargo (NYSE: WFC) announced earnings early Wednesday in the middle of a spate of similar announcements from banks across the country. Like its peers, the first quarter results were down when compared to previous quarters, but exceeded the gloomy outlook of Wall Street prognosticators.

Analysts polled by Bloomberg expected earnings to come in at $0.57 per share versus the $0.60 per share the company reported.

For the quarter, Wells Fargo reported a 12 percent increase in revenue to $10.6 billion, a new record for the company in a quarter.

Despite the relatively positive news, Wells Fargo was still forced to account for waning credit quality. The company said that it set aside $2 billion for potential loan losses in the in the quarter.

Net charge-offs jumped to $1.53 billion from $1.21 billion in the fourth quarter of 2007. Charge-offs for consumer loans — which includes mortgages, credit cards and auto financing — rose 26 percent to $1.21 billion.

The percentage of credit card accounts that were charged-off in the quarter surged to 5.89 percent from 5.01 percent in the fourth quarter of 2007. Wells Fargo charged off $275 million in credit card loans in the first quarter.

“Despite a weakening economy, the continued downturn in housing and expected higher charge-offs, this was a remarkably strong quarter of growth for our company,” said President and CEO John Stumpf in the earnings press release.