GE loan book helps Wells Fargo report first profit rise in three quarters

Wed Oct 14, 2015 10:04am EDT
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By Richa Naidu and Rachel Chitra

(Reuters) - Wells Fargo & Co (WFC.N: Quote), the biggest U.S. residential mortgage lender, reported a rise in quarterly profit for the first time in three quarters on Wednesday, helped by its purchase of commercial loans from General Electric Co (GE.N: Quote).

The San Francisco lender has been using its hefty balance sheet to diversify its business as it braces for a rise in interest rates to cut into demand for home loans.

It is unclear when the U.S. Federal Reserve will hike interest rates, but Fed Chair Janet Yellen recently said she supports raising rates this year.

Some analysts also believe the housing market is at or near a peak, while the U.S Federal Reserve has created further uncertainty by indicating it will soon raise interest rates.

Wells Fargo, whose shares were down 0.5 percent in early trading, agreed earlier this year to buy a portion of GE's commercial real estate loans worth $9 billion.

That acquisition helped to drive up net interest income, a measure of the interest received from loans after paying for funding and accounting for potential loan losses, by 1.7 percent to $10.75 billion.

In its latest deal, the bank said on Tuesday it would buy a portfolio of commercial loans and leases worth more than $30 billion from GE for an undisclosed amount.

Nomura analysts said the deal could add 3-4 percent to earnings per share in 2016.   Continued...

A woman exits a Wells Fargo ATM in the Manhattan borough of New York, October 10, 2015.  REUTERS/Eduardo Munoz -