Wachovia Hits Estimates - TheStreet

Wachovia Hits Estimates

It sees strong investment banking gains.
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Wachovia's

(WB) - Get Report

profit soared 24% in the second quarter, boosted by the bank's acquisition of Golden West.

The Charlotte, N.C., bank made $2.34 billion, or $1.22 a share, compared to $1.88 billion, or $1.17 a share, in the second quarter of 2006. Revenue rose 20% to $8.7 billion.

Analysts expected Wachovia to earn $1.22 a share on $8.4 billion of revenue.

"Our second-quarter performance reflects our continued focus on execution in both the traditional banking and markets-related businesses," said Ken Thompson, Wachovia's chairman and CEO. "All four of our major businesses delivered double-digit earnings growth, fueled by new markets, revenue growth initiatives and an expanded product set.

"The integration of Golden West is proceeding as planned, and we're excited by the cross-sell potential of our expanded platform. Additionally, our focus on efficiency and risk management continues to provide flexibility for investment for future growth," Thompson added.

Wachovia acquired the California mortgage lender in October.

Like most banks this quarter, Wachovia's provision for credit losses -- amounts it is reserving for losses that haven't occurred -- was substantially higher. Compared to the year earlier quarter, the bank's provision tripled to $179 million, but remained flat from the first quarter.

The company didn't cite any significant problem loans in its earnings release, pointing rather to "growth in auto, commercial and consumer real estate lending."

Wachovia also cited nice gains in its corporate and investment banking businesses, as did giant

Citi

(C) - Get Report

earlier this morning.

Wachovia's investment banking revenue rose 19% to $1.96 billion, while profit also rose 19% to $599 million in the unit, which includes corporate lending, investment banking and treasury and international trade finance.

The company said the results were fueled by "record" investment banking performance and higher principal investing gains -- particularly "strong results in advisory and underwriting fees largely related to strength in high grade, structured products, equities underwriting, merger and acquisition advisory services, and loan syndications."

During the quarter, Wachovia agreed to purchase

A.G. Edwards

(AGE) - Get Report

, the largest independent brokerage firm, for $6.8 billion. The deal is expected to close in the fourth quarter.

The St. Louis brokerage will add 6,600 financial advisers to create a combined firm with $1.1 trillion in client assets and nearly 15,000 advisers.

"Market-based revenues and credit quality were very strong in Wachovia's second quarter and better than estimated, although net interest income remains challenged," writes Lori Appelbaum, an analyst at Goldman Sachs, in a note. Wachovia's "reported results of $1.23 per share are a good underlying earnings run-rate and were slightly over the $1.22-per-share consensus. This will be a nice relief for the shares given concerns heading into the quarter regarding pressures on commercial mortgage investment banking activities and California real estate credit quality at Golden West."

Shares were up 9 cents to $51.70.