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Wells Fargo profit rises 9%

SHARE Wells Fargo profit rises 9%

SAN FRANCISCO — Wells Fargo & Co. raked in more service fees and milked customer deposits to boost its second-quarter profit by 9 percent, sticking to a familiar formula that paid off even as more households struggled to pay their bills.

Two smaller rivals, U.S. Bancorp and KeyCorp, didn't fare quite as well in other banking results released Tuesday, but both steered clear of the unnerving losses that have plagued several other lenders in recent months.

The reports provided investors with their first look at how major banks fared during the spring — a period marked by deepening loan problems as rising interest rates, declining home values and higher gas prices strained consumer budgets.

The trouble has been especially acute among borrowers who bought homes during the past few years by relying on risky, adjustable-rate loans because they either had tarnished credit records or didn't make enough money to qualify for more traditional mortgages.

The rates on many of these so-called subprime loans started to climb last year as home values in many parts of the country began to crumble, causing borrowers to relinquish their houses because they can't refinance loans they no longer can afford.

Wells Fargo, the nation's fifth largest bank, has been largely unscathed by the subprime implosion so far, even though it ranks among the sector's largest lenders.

San Francisco-based Wells Fargo earned $2.28 billion, or 67 cents per share, during the April-June period. That compared with net income of $2.09 billion, or 61 cents per share, a year earlier.

Revenue climbed 13 percent to $9.89 billion, the bank's biggest quarterly increase in nearly two years. The last time Wells Fargo grew at a faster clip occurred in the third quarter of 2005 when revenue rose 16 percent.

The earnings matched the average estimate among analysts surveyed by Thomson Financial, while revenue was higher than the $9.64 billion projection.

Wells Fargo shares gained 14 cents to $35.59 Tuesday

Meanwhile, U.S. Bancorp earned $1.16 billion, or 65 cents per share, in the quarter, down 4 percent from $1.2 billion, or 66 cents per share, during the same period last year. Revenue of $3.51 billion was up 1.5 percent from $3.45 billion a year ago.

Analysts polled by Thomson Financial were expecting U.S. Bancorp earnings of 67 cents per share on revenue of $3.47 billion. The Minneapolis-based company's shares fell 33 cents to $32.87 Tuesday.

Cleveland-based KeyCorp, which operates more than 900 branches in 13 states, earned $334 million, or 84 cents per share, in the quarter. That represented an 8 percent improvement from a profit of $308 million, or 75 cents per share, last year.

The performance soared past the average analyst estimate of 70 cents per share, according to Thomson Financial. Keycorp shares surged $1.61 to $36.71 Tuesday.

Contributing: Joshua Freed