Mortgage Lenders Beat Estimates

Wells Fargo & Co. and Washington Mutual Inc., the nation’s largest mortgage lenders, beat Wall Street estimates for first-quarter earnings Tuesday, but business lender City National Corp. fell short, more evidence that consumers are keeping the banking industry strong as commercial lending lags.

San Francisco-based Wells Fargo, the largest bank with headquarters in California, earned $1.49 billion, or 88 cents a share, up from $1.1 billion, or 64 cents, in the first quarter of 2002. Profit from all lending increased 16%, with consumer loans leaping 23%. Commercial and industrial lending was flat.

Washington Mutual, a Seattle-based thrift that is the biggest in California thanks to its 1990s acquisitions of the parents of Home Savings of America and Great Western Savings, earned $1 billion, or $1.07 a share. That was up 5% from $954 million, or 99 cents, in the first quarter of 2002. Loan volume totaled $107 billion for the quarter, up 62% from a year earlier.

Wells Fargo’s earnings were a penny better than the average estimate of analysts surveyed by Thompson First Call. The bank’s shares rose 65 cents to $47.45 on the New York Stock Exchange.

Washington Mutual beat analysts’ estimates by 3 cents a share and also announced a dividend increase after the market closed. Its shares rose 57 cents to $37.05 in regular NYSE trading.

Beverly Hills-based City National, the largest bank based in Southern California, said first-quarter profit slipped to $43.7 million, or 87 cents a share, from $44.2 million, or 87 cents, in the 2002 first quarter. The bank charged off $12.5 million in loans, up from $7 million in the first quarter of 2002, and said seriously overdue loans rose 97% to $99.9 million from $50.6 million year to year.

Cathay Bancorp of Los Angeles said first-quarter earnings grew 10% to $12.5 million, or 69 cents a share, beating Wall Street estimates by a penny. The bank, focused on the Chinese American community, said its deposits and loans both had grown 4% since the end of 2002, while delinquent and defaulted loans were down from the previous quarter and the first quarter of 2002. Cathay’s shares slipped 65 cents to $39.30 on Nasdaq.

Wells Fargo’s year-earlier results included a $276-million charge for a write-off of goodwill. Consumer loans, mortgages and credit cards results were strong, and the bank’s loan-loss provision fell 13%.

Washington Mutual said checking accounts -- a cheap source of funds -- grew by 200,000 during the quarter; retail banking fees totaled $420 million, up 62% from the first quarter of 2002.

The banks’ results followed better-than-expected earnings Monday from giants Bank of America Corp. and Citigroup Inc., both of which credited consumer lending for higher profits.

The continuing question for analysts, regulators and bank officials is how long consumer demand for credit, driven by interest rates near historic lows, can continue to bolster banks and the sputtering economy.

Large banks have reined in commercial lending to keep loan problems under control, according to the Office of the Comptroller of the Currency, which regulates national banks. Small and medium banks have tried to pick up the slack, but demand for commercial and industrial loans has remained low, regulators say.

That was the case at City National, where weak demand for business loans kept the bank’s total loans unchanged at about $8 billion from the fourth quarter of 2002.

“In February, as the war clouds got grayer and the terrorist code color shifted to orange, a lot of very intelligent and prudent businesspeople moved to the sidelines,” City National Chief Executive Russell Goldsmith said in an interview.

For City National, which caters to businesses and wealthy individuals, “the fact that we maintained a record level of loans was a good sign,” Goldsmith said.

Analysts had expected earnings of 89 cents rather than the 87 cents City National reported after the markets closed. The bank’s shares rose 64 cents to $44.67 in regular NYSE trading.