Market Cheers Wells Fargo's Results

Wells Fargo's second-quarter earnings fell $500 million short of last year's level, but investors cheered as the company's quarterly revenue rose to a new high and the board approved a 10% dividend increase. Wells earned $1.8 billion ($0.53 per share) in the second quarter, down from $2.3 billion ($0.67 per share) a year earlier. Results were weighed down by a $1.5 billion increase in the provision for future credit losses. Chargeoffs in the second quarter also totaled $1.5 billion, unchanged from the level recorded in the first quarter but double that of the first quarter of 2007. Chief credit officer Mike Loughlin said the increase in credit reserve reflects "expected higher losses" in Wells Fargo's home equity group and unsecured retail loans. Wells also reported higher losses from its first-lien mortgage portfolio, which Mr. Loughlin said was expected given the continued declines in home prices. Wells Fargo originated $31 billion of retail mortgages in the first quarter, little changed from the previous year's volume, and increased the size of its servicing portfolio to $1.55 trillion. Wells Fargo's stock price rose more than 20% in morning trading on Wednesday after the results were released.