Despite loss, Wells Fargo does 'quite well'

NEW YORK — Wells Fargo & Co. had some good news in its fourth-quarter earnings report even as it lost $2.83 billion.

The banking company that's still absorbing troubled Wachovia Corp. is making loans, getting more money from depositors and maintaining its dividend. And it has no plans to seek more federal financial help.

Wells Fargo's loss grew out of significant charges it took to reduce its exposure to Wachovia's risky assets and a build-up of its reserves to cover future losses. Yet the results also showed that the San Francisco-based bank is holding up better than many of its peers, and the report helped ease some of investors' concerns about the Wachovia deal.

"The underlying results were certainly challenging, but Wells seems to be managing quite well," said Tom Kersting, a financial services analyst at Edward Jones.

Shares soared more than 32 percent, adding $5.17 to $21.36 in afternoon trading.

For the final three months of the year, Wells Fargo reported a net loss of $2.83 billion, or 79 cents per share, after paying preferred dividends. This compares with earnings of $1.36 billion, or 41 cents per share, a year earlier.

The loss from Wachovia's operations totaled $11.17 billion, down from a third-quarter loss of $23.89 billion.

The biggest cost during the quarter came from a write-down of $37.2 billion on Wachovia's loan portfolio, which was in line with the company's previous estimate.

While analysts and investors generally saw Wells Fargo's purchase of the Charlotte, N.C.-based bank as a good long-term move, there had been some concern Wachovia's troubled loan portfolio would cause more problems than Wells Fargo anticipated.

Wells Fargo previously had estimated $60 billion of cumulative credit losses for the life of Wachovia's loan portfolio, and Chief Financial Officer Howard Atkins told The Associated Press Wednesday that estimate has not changed. That means the bank has roughly $22.8 billion of write-downs remaining, which it expects to record over a period of three years.

"We wanted to make sure that as much of the risk of the balance sheet as we could was reduced," Atkins said. While this hurt the bottom line in the fourth quarter, it will have the effect of strengthening the company going forward, he said.

The confidence in Wells Fargo is evident in the fact that the bank has been able to expand both its loan business and deposits amid all the turmoil in the financial markets.

The bank extended $22 billion in new loans and originated $50 billion in new residential mortgages during the fourth quarter. Meanwhile, core deposits increased 10 percent year-over-year, and 31 percent over the third quarter.

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