Industry News

Wells Fargo reports record profits despite losses on ARMs

Bank takes $250 million hit unloading loans

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Wells Fargo says it generated record profits of $2.09 billion in the second quarter, despite taking a $250 million loss on the sale of $26 billion in adjustable-rate mortgages and other loans. Diluted earnings per share were a record $1.23, up 10 percent from $1.12 in second-quarter 2005 and 13 percent (annualized) from first-quarter 2006.The bank's profits for the quarter were up 9 percent over last year, and revenue was also up 12 percent, hitting a record $8.79 billion. "Our strong 12 percent revenue growth was achieved despite taking $250 million of losses on the sale of ARMs and debt securities this quarter compared with negligible gains on the sale of debt securities in second-quarter 2005," said Senior EVP and Chief Financial Officer Howard Atkins. "This reduced reported year-over-year revenue growth by 3 percentage points." Wells Fargo said it sold off $26 billion in ARMs in the second quarter "to further improve long-term earning asset yields." With the sale factored in, ave...