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SAN FRANCISCO (
Wells Fargo's (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
Citigroup (C - Get Report),
Bank of America (BAC - Get Report), which saw its allowance for loan losses decline by $2 billion, and
JPMorgan Chase (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.