Wachovia Earns Record $2.34 Billion

Wachovia Corp. (NYSE:WB) reported on July 20th net income of $2.34 billion, or $1.22 per share, in the second quarter of 2007 compared with $1.88 billion, or $1.17 per share, in the second quarter of 2006.

After-tax net merger-related expenses amounted to 1 cent per common share in the second quarters of both 2007 and 2006. Excluding these expenses, earnings were $2.36 billion, or $1.23 per share, in the second quarter of 2007 and $1.90 billion, or $1.18 per share, in the second quarter of 2006.

"Our second quarter performance reflects our continued focus on execution in both the traditional banking and markets-related businesses," said Ken Thompson, Wachovia chairman and chief executive officer. "All four of our major businesses delivered double-digit earnings growth, fueled by new markets, revenue growth initiatives and an expanded product set. Especially gratifying is our employees' continuing dedication to providing industry-leading customer service — which generated record loyalty and satisfaction scores this quarter. The integration of Golden West is proceeding as planned, and we're excited by the cross-sell potential of our expanded platform. Additionally, our focus on efficiency and risk management continues to provide flexibility for investment for future growth."

Results in the second quarter of 2007 included the full quarter impact of the October 1, 2006, acquisition of Golden West.

In the second quarter of 2007 compared with the second quarter of 2006, Wachovia:

Grew revenue 20 percent on higher loans and deposits, driven by the addition of Golden West and organic growth, while higher fee and other income largely reflected growth in both our traditional banking and securities businesses.
Increased net interest income 21 percent on higher average consumer loans, largely reflecting the impact of acquisitions, and higher average commercial loans, up 13 percent.
Commercial loan growth was led by middle-market commercial and international lending. Increased consumer loans were led by higher real estate loans primarily due to the addition of Golden West, as well as growth in auto lending and in credit card.
Average core deposits rose 30 percent and average low-cost core deposits were up 6 percent. Growth in lower spread loans, a shift in deposit mix, acquisition impact and the effects of the inverted yield curve resulted in 26 basis points of margin compression.
Generated 18 percent growth in fee and other income, reflecting solid retail brokerage transaction activity and continued strength in retail brokerage managed account fees; record originations in key investment banking products and robust principal investing results; and higher traditional banking fees.
Experienced a 14 percent increase in noninterest expense largely reflecting the impact of acquisitions, higher revenue-based incentives and commissions, and growth initiatives.
Recorded a provision for credit losses of $179 million largely reflecting growth in auto, commercial, and consumer real estate lending. Net charge-offs were $150 million, or an annualized 0.14 percent of average net loans. Total nonperforming assets including loans held for sale were $2.1 billion, or 0.47 percent of loans, foreclosed properties and loans held for sale.
In addition, in the second quarter of 2007, Wachovia announced an agreement to acquire A.G. Edwards, Inc., a retail brokerage firm headquartered in St. Louis, Missouri. The transaction, which is subject to applicable regulatory approvals and approval of A.G. Edwards shareholders, is expected to close in the fourth quarter of this year. -Wachovia