Wachovia Profit Rises 24 Percent

Published 12:00 am Monday, December 26, 2005

RALEIGH, N.C. – Wachovia Corp. said Friday that second-quarter profits rose 24 percent as the nation’s fourth-largest bank benefited from the acquisition of Golden West Financial Corp. and its growing lending business.

The Charlotte, N.C.-based company said net income rose to $2.34 billion, or $1.22 per share, compared with $1.88 billion, or $1.17 per share in the year-ago period. Revenue grew 20 percent to $8.69 billion from $7.26 billion in the second quarter of 2006.

Wall Street expected earnings of $1.22 per share on $8.4 billion of sales, according to analysts polled by Thomson Financial.

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Wachovia said its revenue grew on loans and deposits, driven by the $24 billion October acquisition of Golden West. That addition helped drive a 53 percent jump in the company’s average loans, boosting net interest income 21 percent to $4.46 billion from $3.68 billion a year earlier. Fee and other income rose to $4.23 billion from $3.58 billion the previous year.

Merger and restructuring expenses cost the company $20 million, or 1 cent per share, the company said.

The company said its net charge-offs as a percentage of average loans rose to 0.14 percent from 0.08 percent _ mirroring higher charge-offs from financial institutions across the country that are dealing with weakness in the housing market and subprime borrowers. Non-performing assets as a percentage of loans, net of foreclosures and loans held for sale, rose to 0.47 percent from 0.25 percent a year earlier.

Wachovia also earmarked $179 million to pay for future credit losses, about three times more than the company set aside one year ago.

Bart Narter, senior analyst with Boston-based consulting firm Celent, questioned whether Wachovia had set aside enough money, noting that the jump in non-performing assets could leave the company with future losses.

“They’re basically hitting their numbers this quarter by pretending that they don’t see all these loan problems on the horizon,” Narter said.

Shares fell $1.50, or 2.9 percent, to $50.11, in midday trading Friday.

The bank announced in May that it had agreed to buy A.G. Edwards for $6.8 billion in a deal that will create the nation’s second-largest retail brokerage.

A service of the Associated Press(AP)