Wells’ Profit Hurt by Acquisition Costs

Wells Fargo & Co., the nation’s eighth-biggest bank, on Tuesday reported a drop in profit--sharply below analysts’ expectations--related to its merger with First Interstate Bancorp.

Meanwhile, Chase Manhattan Corp. and Citicorp, the nation’s two largest banking companies, reported healthy earnings gains in their fourth quarters, continuing the strong year-end trend among major banks.

San Francisco-based Wells said operating net earnings were $123 million, or $1.12 per share. Net income for the same quarter of 1995 was $306 million, or $6.29 a share, but the company said its April 1 merger with First Interstate makes any comparisons between the two quarters impossible.

Wells Chairman Paul Hazen attributed the 60% drop in net income to the expense of merging First Interstate customers into its own system.

“Based on our experience with the conversion, we remain confident that we will meet our merger expense targets in 1997,” he said.

Profit for all of 1996 was $1.07 billion, up 4% from $1.03 billion, the company said. Earnings per share for 1996 were $12.21, compared with $20.37 for 1995.

A survey of analysts showed they expected Wells to earn $2.77 per share. But investors, hoping they had seen the last of expenses related to the First Interstate merger, drove Wells’ shares up $9 to $288.75 on the New York Stock Exchange.

San Francisco-based Sumitomo Bank of California, meanwhile, posted fourth-quarter net income of $11.7 million, or 62 cents per share, down from $13.8 million, or 75 cents, during the same period in 1995. The bank, however, posted record net for the full year.

New York-based Chase Manhattan said it earned $836 million, or $1.74 a share, in the fourth quarter, compared with $827 million, or $1.73 cents, a year earlier. The latest results include costs related to Chase’s March merger with Chemical Banking Corp.

Excluding the merger-related costs, Chase earned $901 million, or $1.89 a share, up from $827 million, or $1.73, a year earlier.

Citicorp, the nation’s second-largest banking company, said it earned $987 million, or $1.97 a share, on revenue of $5.75 billion in the fourth quarter. A year ago, it earned $905 million, or $1.72, on revenue of $5.05 billion.

* MORE EARNINGS: D3