Image by Getty Images via @daylife
Rocky capital markets and sluggish economic growth made the fourth quarter of 2011 a challenging one for the biggest banks in America, but at least one was better positioned to weather the turmoil than its rivals.
Wells Fargo booked a 20.5% gain in fourth-quarter profit Tuesday, reporting net income of $4.1 billion, or 73 cents per share, on $20.6 billion. Meanwhile, rivals JPMorgan Chase and Citigroup booked profit declines of 23% and 11% from a year ago, respectively.
Despite a less-than-robust environment for loan growth -- Wells Fargo reported just a 1.2% increase in its total loans to $769.6 billion -- the bank said balances are increasing fast enough to offset non-strategic or liquidating portfolios.
Wells Fargo's results beat on both the top and bottom line, the latter by a penny as Wall Street expected earnings of 72 cents per share. Chief Executive John Stumpf touted progress in the bank's integration of Wachovia, which it acquired at the peak of the 2008 financial crisis, and said Wells Fargo is focused on opportunities for growing market share in 2012, improving efficiency and "returning even more capital to our shareholders."
The latter will depend on the Federal Reserve's view of the firm's capital plan, which the central bank required major U.S. firms to stress test for adverse scenarios including a repeat of 2008 and a breakdown in Europe. (See "The Fed's 2012 Stress Test Recipe.")
Leading into bank earnings season, JMP Securities analyst David Trone said he expects "the Fed [will] still be cautious on capital returns, because of the capacity for the eurozone to melt down," limiting banks' ability to rapidly increase dividends or share buybacks.
Shares of Wells Fargo were up 2.8% Tuesday morning. Citigroup was down 3.7% after its own earnings report, JPMorgan Chase slipped 1.3% and Bank of America managed a 2.1% gain ahead of its results, due Thursday.