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Wachovia in Line

Third-quarter numbers match targets.

Updated from 7:13 a.m. (EDT)


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reported a 13% gain in third-quarter profits, as the nation's fourth-largest bank matched Wall Street expectations.

The Charlotte, N.C., bank made $1.88 billion, or $1.17 a share, up from $1.66 billion, or $1.06 a share, in the year ago period. Revenue rose 5.2% to $7.04 billion.

Excluding merger-related costs, operating earnings were $1.19 a share, in line with the Thomson Financial consensus estimate. But revenues at the bank fell short of the analyst consensus estimate of $7.28 billion.

In early trading shares of Wachovia, the first big bank to report third-quarter earnings, were trading down 92 cents, or 1.6%, to $55.55.

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Net interest income, the profit the bank generates from its lending and deposit operations, rose by 4% from a year ago, but fell by 6.8% from the second quarter, to $3.6 billion.

Wachovia once again delivered double-digit earnings per share growth due to strong fundamentals and focused execution," said Ken Thompson, Wachovia chairman and chief executive officer. "In the face of a challenging yield curve environment, we continued to improve efficiency, while asset quality remained strong.''

Wachovia, with $555 billion in assets, says loans at the end of the second quarter rose 21% from a year ago and by 2.8% to $291 billion. The company says middle-market and business banking, commercial real estate and large corporate lending contributed to commercial loan growth. Higher real estate-secured loans and its March acquisition of Westcorp contributed to its consumer loan growth.

Yet Wachovia's net charge offs doubled from the year-ago quarter and from the second quarter, to $116 million. The bank also increased its provision for loan losses by 31%, to $108 million as a result of its "growth in auto lending and other consumer loans as well as lower commercial loan recoveries," it says.

Those loans the company considers "nonperforming" fell by 15% from a year ago, to $759 million, it says.

Deposits squeaked higher by 1% from a year ago, but fell from the second quarter by 1.5%, to $323 billion, Wachovia says. Average core deposits from Wachovia's general banking operations - where the bulk of its deposits come from -- rose 6.7% from the third quarter of last year, to $216 billion. The bank says that deposit mix continues to shift from demand deposits to certificates of deposit and money market accounts.

Noninterest expenses rose 1%, to $4 billion.