NEW YORK (AP) — The growth of its credit card business helped Wells Fargo & Co. post a 30 percent jump in second-quarter profit on Tuesday.
While its cards are still a tiny part of the overall credit card market — one industry expert puts Wells as the nation's eighth largest card issuer with about 2 percent of the outstanding balances — the bank reported a 63 percent increase in card accounts over last year's second quarter.
New accounts more than doubled in its Eastern market, where Wells Fargo is completing its combination with Wachovia, which it bought in late 2008, CEO John Stumpf said during a conference call to discuss results.
The bank also reported 10 percent growth from last year in fees from credit cards during the quarter, despite regulations that have pressured fee income. That reflected both new accounts and higher card use for existing customers, which mirrored reports from other banks.
The growth comes as Wells Fargo continues to emphasize opening new cards for customers who are already doing business with the bank. Traditionally, it has focused its card business on customers who have checking and savings accounts. It has extended those efforts to customers who have only mortgage or brokerage accounts, but has not moved to widespread offers for cards to consumers in general.
The gains caught analysts' attention during the conference call.
Question: It looks like you got some good fee growth quarter-over-quarter and year-over-year, but it's still a relatively small portfolio compared to your peers. What are the opportunities in that portfolio?
Answer (CEO John Stumpf): "We have something in the range of 28 million-plus retail checking accounts, and the penetration of credit cards in the East is about 14.5 percent of retail checking accounts have credit cards. It's two-and-a-half or three times more than that in the West. We think there's huge opportunity here.
"I can't wait to get a credit card in every one of our credit-worthy customer's wallets, and not only in there, but to be the dominant or primary card.
"I think there's huge organic opportunity here. We like that business from a customer perspective, and not only for the transaction volume that they do, but it's another payment product. So we think there's big opportunity.
"And again, we are growing checking accounts quickly. Net checking accounts on the retail side are up 7 percent year-over-year, and those are big numbers. It's a big base."
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