Wells Fargo & Co.’s credit card portfolio shrank somewhat in 2010 as charge-offs declined sharply, the San Francisco-based company said Jan. 19 when announcing fourth-quarter earnings.
Credit card receivables stood at $22.3 billion at the end of the year, down 7.1% compared with $24 billion a year earlier. Wells charged off $452 million in credit card loans during the quarter ended Dec. 31, down 28.7% from $634 million a year earlier.
The net charge-off rate for the quarter was 8.19%, down 242 basis points from 10.61% a year earlier because of tighter underwriting policies, including extending fewer balance transfers, the company said.
The bank, which continues to work to cross-sell products through its branches, said at yearend customers on average had 5.7 Wells products per household, up from 5.47 in December 2009.
During a conference call with analysts to discuss earnings, John Stumpf, Wells chairman and CEO, said the company’s integration following its acquisition in late 2008 of Wachovia Corp. is largely complete. Wells has replaced more than 5,000 Wachovia ATMs in eastern regions of the U.S. with Wells Fargo machines, which now number 12,000 in total.
The shift included expanding Wells’ Web-enabled, envelope-free ATMs to new markets in the East. Because of the upgrade, deposits at ATMs in the region have increased by 55%, Stumpf said.
Wells executives also hinted that the bank likely would be forced to increase credit and debit card fees to offset expected revenue declines caused by pending regulatory changes, including the so-called Durbin Amendment within the Dodd-Frank Act.
The new regulations “will clearly place additional costs on the nation’s payment system, some of which will need to be borne in the form of higher fees,” said Howard Atkins, Wells chief financial office. He did not provide specifics, calling the effect of the Fed’s proposed 12-cent debit card interchange rate cap “a work in progress.”
Wells also will need to find new ways to compensate for the cost of debit cards, which largely have transplanted cash and checks and are an “enormously valuable” service to merchants and banks, Stumpf noted. “Because at the end of the day if we can’t get paid this way we’ve got to get paid a different way,” he said.
As a company, Wells Fargo’s net income rose 20.9% during the quarter, to $3.41 billion from $2.82 billion a year earlier. Revenue fell 5.3%, to $21.5 billion from $22.7 billion.
