Wells Fargo’s wealth business was the bright spot in an otherwise bleak first quarter, as the San Francisco-based bank reported its first decline in profits in almost five years.
Overall, the bank reported earnings of $5.8 billion, or $1.04 a share, for the first quarter of 2015. That’s down almost 2 percent from the record profit of $5.89 billion, or $1.05 a share, Wells Fargo reported a year ago. Despite the decline, Wells Fargo still beat analysts’ estimates by $0.06, according to Seeking Alpha.
Prior to Tuesday’s earnings report, the bank reported 18 consecutive quarters of higher profits on a year-over-year basis since mid-2010, CEO John Stumpf said Tuesday. Revenues at the bank rose 3 percent to $21.3 billion from $20.6 billion a year ago.
Wells Fargo’s attributed the decline to lower loan profitability, even as total loan volume rose 4.2 percent from the first quarter of the year to $861.2 billion. Wells Fargo’s community banking division also took a small hit, with profits declining 5 percent from a year ago.
“Credit quality remained strong, as net charge-offs continued to decline. Expenses also decreased from the prior quarter and our efficiency ratio improved," said Chief Finanical Officer John Shrewsberry.
Wells Fargo's Wealth, Brokerage and Retirement Division reported a net income of $561 million in the first quarter, a 15 percent increase from the $475 million reported a year ago and an 8 percent increase from last quarter.
Advisory fees, commissions and other wealth management fees made up 23 percent, or about $2.4 billion, of the firm’s overall $10.3 billion in non-interest income earned during the first quarter, in line with the previous quarter. Shrewsberry said the St. Louis-based employee retail brokerage unit partnership with private banking generated $1 billion monthly in referred investment assets.
The wealth division reported revenue of $3.7 billion in the first quarter, up 7 percent from a year ago and 2 percent from the prior quarter. Client assets within the retail brokerage business grew 4 percent from a year ago to about $1.4 trillion.
Wells Fargo Advisors, the retail brokerage unit, reported managed account assets of $435 billion in the first quarter, up 12 percent year-over-year and 3 percent from the fourth quarter.
The firm lost a net 53 advisors during the quarter, bringing total headcount to 15,134. The wealth division saw non-interest expenses increase by $120 million, or 4 percent, from a year ago, driven by higher personnel expenses, the firm said.
The cross-sell ratio for the wealth, brokerage and retirement business came in at 10.44 products per household during the quarter, down slightly from 10.49 reported last quarter.