Wells Fargo profits continue to increase

Filed under: Banking & Finance |

Continuing on a four-year trend, Wells Fargo reported this week that its third-quarter profits were up 13 percent.

It may be proof that Wells Fargo’s formula of capitalizing on the mortgage and commercial loan market is working, considering the strategy has provided the bank with double-digit earnings for the last four years.

However, changes to accounting rules that will require all publicly held companies to begin treating employee stock options as an expense could make it difficult for Wells Fargo to continue the trend next year. Bank officials estimated that the changes will shave 6 cents per share from its 2006 earnings.

This year’s third quarter net income totaled $1.98 billion, or $1.16 per share, from July to September, compared with a profit of $1.75 billion, or $1.02 per share, in 2004.

Revenue for the period totaled $8.5 billion, a 16 percent increase from a year earlier. The earnings were a penny above analysts’ estimates.

The earnings marked the 16th time in the last 17 quarters that Wells Fargo’s quarterly earnings have increased by at least 10 percent from the prior year.

FDIC warns about higher insurance fees

With Congress considering deposit insurance reforms, the Federal Deposit Corp. is anticipating higher insurance fees for banks.

FDIC Chairman Don Powell said fee hikes could come as early as the end of the year.

Powell said the statutory reserve ratio of the fund balance to insured deposits declined from 1.32 percent in September 2004 to 1.26 percent in June 2005.

The FDIC is required to assess premiums to cover shortfalls when the ratio drops below 1.25 percent.

Insurance rates are expected to rise next year if the number of troubled banks increases and if the insured deposit growth trend continues.

Final word on 2006 rates will come when the FDIC board convenes in November.

Ent offers unique credit protection program

Ent Federal Credit Union has launched a new credit protection plan for its members called CreditDefender, which protects against unemployment.

The plan will save members from being reported as delinquent to the credit bureau in the event of a death, disability or involuntary unemployment.

Loan payments also will be cancelled without penalty or added interest.

The plan is unique in that it protects against unemployment and not simply death or disability.

The plan will only be available on select consumer and home equity loans, and depending on the plan selected, Ent will cancel an entire loan or a certain number of loan payments when an unexpected real-life event occurs.

Monthly costs of each plan will vary based on loan type and loan amount, but the price is the same for every member, regardless of age.

For more information, go to www.ent.com

U.S. Bancorp reports record income for third quarter

U.S. Bancorp reported a net income of $1.15 million for the third quarter of 2005. About $1.06 million was reported for third quarter of 2004.

Net income of 62 cents per diluted share in the third quarter of this year was 6 cents higher, or 10.7 percent, than the same period last year.

Return on average assets and return on average equity were 2.23 percent and 22.8 percent, respectively, for the third quarter of 2005. Last year’s third quarter returns of 2.21 percent and 21.9 percent, respectively.

Chase a trailblazer in credit card industry

Chase bank has been recognized by the The Outstanding Issuing Organization with an award for its credit card issuing practices.

Chase issues more credit cards than any other institution, having more than 100 million in circulation, According to comments from the award organization, Chase is recognized for taking a trail-blazing role in issuing smart card technology while other banks took a “wait and see” attitude.

Chase issued its contactless Blink cards this year.

The contactless payment feature provided new convenience and security for users. So far more than 2 million Blink cards have been issued in the United States.

Safeway profits take a dive

Safeway Inc. the nation’s No. 3 grocery store chain, posted third quarter profit losses of nearly 23 percent.

The closing of 26 stores in Texas, as well as management layoffs in California, are suspected to have caused the decline.

Profit was $122.5 million, or 27 cents a share, in the third quarter, compared with $159.2 million, or 35 cents a share, during the same period last year.

Safeway said profit was reduced by 8 cents per share due to an impairment charge in Texas and by 3 cents per share for an employee buyout charge in California.

Analysts had expected the California-based Safeway to earn 35 cents per share.

Some analysts suspect market threats posed by Wal-Mart and Kroger stores could continue to eat away at Safeway’s profits.

Rob Larimer covers banking and finance for the Colorado Springs Business Journal.