Wells Fargo & Co. said Tuesday its 1994 net income jumped 37.4% to $841 million. This, combined with a $760 million stock buyback program, nearly doubled earnings per share at the San Francisco-based banking company to $4.
Return on assets for 1994 jumped to 1.62% from the 1.20% earned in 1993. Return on equity amounted to 22.41%, compared with 16.74% in 1993.
Fourth-quarter results were up 13.2% from a year earlier, to $215 million. The quarterly boost came from a $54 million increase in interest income and a $50 million cut in loan-loss provisions.
The strong earnings gain for the year was in spite of a $47 million decline in net interest income, to $2.6 billion. Likewise, the company's net interest margin fell by 19 basis points, to 5.55%.
Thomas Brown, a bank analyst with Donaldson, Lufkin & Jenrette, said the decline in margin was due to the bank's inability to reinvest money in its swaps portfolio at the same spreads it earned during 1993. At the same time, the spread between lending rates and consumer deposit rates narrowed.
The Federal Reserve Board's interest rate increases offset some of these problems, though.
"In effect, what happened was they did lose the swaps income, but because of increases in the prime lending rate, the net interest spread actually widened," Mr. Brown said.
During the year, the bank added $1.25 billion in new commercial and industrial loans. At Dec. 31, the commercial loan portfolio amounted to just under $8.2 billion, or 22.5% of the bank's total loan portfolio. +++ Wells Fargo & Co. San Francisco, CA Dollar amounts in millions (except per share) Fourth Quarter 4Q94 4Q93 Net income $215 $190 Per share 3.96 3.18 ROA 1.64% 1.46% ROE 23.96% 19.85% Net interest margin 5.53% 5.69% Net interest income 656.0 666.0 Noninterest income 294.0 295.0 Noninterest expense 577.0 557.0 Loss provision 30 80 Net chargeoffs 79 134 Full Year 1994 1993 Net income $841 $612 Per share 14.78 10.10 ROA 1.62% 1.20% ROE 22.41% 16.74% Net interest margin 5.55% 5.74% Net interest income 2,610 2,659 Noninterest income 1,200 1,093 Noninterest expense 2,156 2,162 Loss provision 200 550 Net chargeoffs 369 664 Balance Sheet 12/94 12/93 Assets $53,374 $52,513 Deposits 42,332 41,644 Loans 36,347 33,099 Reserve/nonp. loans 358% 177% Nonperf. loans/loans 1.6% 3.6% Nonperf. assets/assets 1.6% 3.0% Leverage cap. ratio 6.90% 7.39% Tier 1 cap. ratio 9.10% 10.48% Tier 1+2 cap. ratio 13.20% 15.12% ===
