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Updated to include information from the conference call.



) --

Wells Fargo

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management outlined the

previously undetermined cost of complying with new limits on debit-card interchange fees.

During a conference call on Friday, CFO Howard Atkins indicated that the new rule may sap $250 million from Wells' top line each quarter initially, until the bank can implement new fees to make up the difference. But Atkins added several caveats, since the interchange provision has not been implemented yet.

"It's still being debated and we would suggest there's a wide range of potential outcomes, including obviously no impact if this regulation is not implemented," said Atkins.

The so-called "Durbin amendment," named after the senator who put it into the financial reform bill, was widely opposed by the financial industry, but adored by merchants who will benefit from it.

TCF Financial

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, whose income appears to have the most exposure to interchange fee restrictions, has sued the

Federal Reserve

to prevent its implementation.

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Atkins made his comments during a conference call with analysts to discuss Wells Fargo's fourth-quarter results. The San Francisco-based bank's earnings came right in line with Wall Street expectations, with improving credit on its consumer portfolio and growth in wholesale banking and wealth management helping boost results.

Wells earned $3.4 billion, or 61 cents per share during the period ended Dec. 31, up 21% from the year-ago quarter. Revenue came in at $21.5 billion, down from the year-ago period but up from the third quarter.

Earnings were in line with what Wall Street had expected, with revenue slightly higher than the average analyst estimate of $21 billion, according to



Both charge-offs and delinquencies in Wells' consumer and commercial declined from the previous and year-ago quarters. Still, community banking profit was sluggish, at $2 billion, in line with the previous quarter and down slightly from the fourth quarter of 2009.

However, wholesale banking profit jumped to $1.6 billion, up 60% from a year ago and up 11% from the third quarter. Wells attributed the increase to better margins, "solid" deposit gains and growth in its loan portfolio.

Wealth, Brokerage and Retirement, Wells Fargo's smallest business line, swung to a $197 million profit from a year-ago loss of $16 million. Earnings were down 23% from the third-quarter, however. Wells said noninterest expenses had risen due to higher commissions as brokers work to increase business.

Apart from future interchange-fee-related costs, Wells outlined $360 million in other costs for other regulations on credit cards and federal insurance fees, which were largely in line with expectations. Those costs -- which are really a lack of revenue -- are expected to decline over time as Wells works to supplement the gaps with new fees.

During the conference call, CEO John Stumpf criticized the Durbin rule for interfering with the private market.

"I'm not in favor of government price controls as part of a market-based economy that we have," said Stumpf. "I just think that's bad as an initial thing as an overall statement. It wouldn't be free enterprise and government debt. What product is next, what industry comes next? I've not seen that work in the past very well."

Stumpf went on to describe the benefits provided by debit cards that don't seem to have been taken into consideration by lawmakers because they're hard to define. For instance, using debit cards removes the risk and costs associated with carrying cash or handling checks.

"That value creation helps

merchants and we need to get compensated and I don't understand why cost became the issue," Stumpf said.

JPMorgan Chase

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CEO Jamie Dimon made similar comments earlier this month, when discussing his bank's results. Dimon indicated that while retailers pay 7 to 8 cents per dollar on debit card transactions, cash transactions cost 3 to 7 cents per dollar and ordinary checks cost seven cents per dollar without the same protections or convenience. A guaranteed check, which functions like a debit card, costs 12 cents per dollar, according to Dimon.

Dimon concluded that the notion that cash transactions are free "was a false premise."

-- Written by Lauren Tara LaCapra in New York


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