Wells Fargo & Co.'s third-quarter earnings surged 98% as results were boosted by the bank's acquisition of Wachovia, but credit-loss provisions and net charge-offs continued to rise.
Shares fell 2.3% to $29.82 in premarket trading despite results topping analysts' expectations. The stock is up 3.3%year-to-date and has nearly quadrupled from a 14-year low in March.
The company is considered one of the more stable banks, although some have expressed concern about the risk Wells Fargo assumed with its purchase of troubled Wachovia, which left it heavily exposed to the rapidly weakening commercial real estate sector. Last month, Chief Executive John Stumpf said the ongoing merger was on schedule.
Wells Fargo, the third-largest U.S. bank by market capitalization, posted earnings of $3.24 billion, or 56 cents a share, up from $1.64 billion, or 49 cents a share, a year earlier. The company had 41% more shares outstanding in the most recent period amid the takeover. Revenue more than doubled to $22.5 billion.
Analysts polled by Thomson Reuters projected earnings of 37 cents on revenue of $21.64 billion.
Credit-loss provisions were $6.11 billion, more than double from a year earlier and up 20% from the prior quarter. Net charge-offs rose to 2.5% of average loans from 1.96% and 2.11%, respectively. Nonperforming assets increased to 2.93% from 2.23% in the prior quarter. Stumpf said last month he expected the bank's nonperforming assets to increase in the quarter.
Average total loans fell 2.8% from the second quarter, as consumer and commercial demand for credit remains moderate and Wells Fargo continued to reduce certain higher-risk loan portfolios. Average total core deposits fell 0.8%.
