SAN FRANCISCO (
(WFC - Get Report) continued credit quality improvement enabled the company to release $1 billion in reserves during the first quarter, boosting earnings and following the trend for the largest U.S. banks that had already reported earnings.
The company's net charge-offs -- loan losses less recoveries -- fell for the fifth-straight quarter to $3.2 billion, a 16% decline from the previous quarter and a 40% decline from a year earlier. The company's annualized ratio of net charge-offs to average loans was 1.73%, improving from 2.02% in the fourth quarter and 2.71% in the first quarter of 2010. With loan loss reserves covering 2.98% of total loans as of March 31, it appeared the company was well-positioned for further reserve releases in coming quarters, which would continue to boost earnings.
| Wells Fargo CEO John Stumpf
Wells Fargo's reserve release was in line with the other "big four" U.S. banks, including
(C - Get Report),
Bank of America
(BAC - Get Report), which saw its allowance for loan losses decline by $2 billion, and
(JPM - Get Report).
Citigroup released $3.3 billion in credit reserves during the first quarter, while JPMorgan's allowance for loan losses declined by $2.5 billion. Bank of America's loan loss reserves declined by $2 billion during the quarter.
The company also reported a decline in mortgage repurchase losses to $249 million in the first quarter from $464 million in the fourth quarter and $402 million in the first quarter of 2010. Total liability for mortgage repurchases was $1.2 billion as of March 31, declining from $1.3 billion the previous quarter and $1.3 billion a year earlier.
Wells Fargo's nonperforming assets -- including nonaccrual loans and repossessed assets -- totaled $30.6 billion as of March 31, declining 5% from the previous quarter and 11% from a year earlier. The ratio of nonperforming assets to total assets was 2.46% as of March 31, improving from 2.57% in December and 2.83 % in March 2010.
Earlier-stage loan delinquencies also declined, with "6% of the retail loan portfolio was 30 days or more past due, down 15% from the previous quarter," according to Mike Koughlin, chief risk officer.