Wells Fargo's surprise announcement Thursday predicting record quarterly profits of $3 billion means the bank is reaping benefits from its Dec. 31 purchase of Wachovia, analysts said. But the good news from Wells doesn't mean the end of the financial crisis is in sight, they added.
Wachovia generated about $8 billion in first-quarter revenue and added checking accounts for consumers and small businesses, Wells said. That represents a huge improvement from the fourth quarter, when Wachovia posted revenue of just $1.7 billion as jittery consumers took their business to banks that they viewed as safer.
Some analysts doubted San Francisco-based Wells' decision to buy Wachovia last fall, as the Charlotte bank struggled under bad mortgage loans. Some vindication came Thursday for Wells chief executive John Stumpf, who said Wachovia customers are returning and that the purchase "has proven to be everything we thought it would be." He added that Wachovia's first-quarter "financial contributions" had exceeded expectations.
"This will be the deal that keeps on giving to Wells Fargo," said Ken Thomas, a Miami-based banking consultant and economist.
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Thursday's announcement may have given investors a first glimpse of the power of a combined Wells-Wachovia, but it's unclear what the news means for Charlotte, which is bracing for layoffs.
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