Business briefs

WASHINGTON — A Yahoo Inc. executive was accused Tuesday of giving false testimony to Congress last year regarding the company’s role in the arrest of a Chinese journalist.

A House committee wants Yahoo CEO Jerry Yang and general counsel Michael Callahan to clarify at a Nov. 6 hearing the allegedly untruthful testimony Callahan gave Congress in February 2006.

"We want to clarify how that happened, and to hold the company to account for its actions both before and after its testimony proved untrue,” Rep. Tom Lantos, D-Calif., chairs of the House Foreign Affairs Committee, said in a press release. "And we want to examine what steps the company has taken since then to protect the privacy rights of its users in China.”

Yahoo spokeswoman Tracy Schmaler said in an e-mailed statement that the committee’s accusation is "grossly unfair and mischaracterizes the nature and intent of our past testimony.” She said Yahoo’s representatives have been truthful with the committee.

The Sunnyvale, Calif.-based company said it is considering the committee’s request to have Yang and Callahan appear before it.

San Francisco-based Dui Hua Foundation released documents in late July showing that the Beijing State Security Bureau had written Yahoo saying it wanted evidence about journalist Shi Tao, who was suspected of "illegally providing of state secrets to foreign entities,” the committee said.

Wells Fargo

earnings rise 4 percent

SAN FRANCISCO — Wells Fargo & Co.’s profit grew at its slowest pace in more than six years during the third quarter, dragged down by deteriorating home loans likely to cause more trouble in the months ahead.

Wells Fargo, the fifth largest U.S. bank, said Tuesday it overcame the rocky market conditions to produce a profit of $2.28 billion, or 68 cents per share, during the three months ended in September. That represented a 4 percent increase from net income of $2.19 billion, or 64 cents per share, a year ago.

It’s the first time that Wells Fargo’s quarterly profit has risen by less than 5 percent since the San Francisco-based bank suffered an $87 million loss during the spring of 2001. The results fell below the average earnings estimate of 70 cents per share among analysts polled by Thomson Financial.

Wells Fargo’s revenue during the period improved 10 percent to $9.85 billion, but that figure also lagged the average analyst estimate of $10.03 billion.

"They came out of the quarter bruised, but by no means broken,” said RBC Capital Markets analyst Joe Morford.

In an expression of investors’ concern, Wells Fargo shares shed $1.40 Tuesday to finish at $34.55.

The performance was still far better than the nation’s largest bank, Citigroup Inc., which on Monday posted a 57 percent drop in its third-quarter profit. Other major banks also have indicated their fortunes dimmed during the summer amid a credit crunch triggered by the worst real estate slump in decades.

Wells Fargo appears to be weathering the storm so far because it focuses more on basic consumer and business lending while limiting its exposure to the more exotic mortgage and hedging instruments currently haunting Citigroup and other large U.S. banks.

"We are doing remarkably well in a difficult environment,” Howard Atkins, Wells Fargo’s chief financial officer, said in a Tuesday interview.

The third quarter nevertheless raised some red flags.

Like many other lenders, Wells Fargo is being hurt by a combination of crumbling home values and overextended borrowers who can’t afford to make their monthly mortgage payments as once-low adjustable interest rates reset to higher levels.

"The housing sector is weak and we are not immune to that,” Atkins said.

The turmoil prompted Wells Fargo to mark down the value of its mortgages by $490 million during the quarter.

Wells Fargo’s most nettlesome problems involve loans made to borrowers that turned their homes into personal piggy banks as property values steadily rose through much of the United States from 2000 to 2005.

The bank recognized $153 million in losses on home equity loans in the third quarter, up by more than fivefold from $27 million in losses at the same time last year. Wells Fargo warned its losses on home equity loans are likely to climb even higher in the current quarter and remain at "elevated levels” next year.

Atkins said the bank is having the toughest time collecting from homeowners in parts of the Midwest and California’s Central Valley, where many borrowers now owe more money than their properties are worth.

Wells Fargo ended September with about $83 billion in home equity loans on its books. The bank held another $67 billion in so-called first mortgages — typically the loans used to buy the property. Wells Fargo’s losses on first mortgages totaled just $16 million in the third quarter.

The bank’s overall loan losses in the quarter totaled $892 million, a 46 percent increase from $613 million at the same time last year. The losses represent about 1 percent of Wells Fargo’s total loan portfolio, up from 0.86 percent a year ago.

In a telling indication of mounting stress facing borrowers, Wells Fargo said payments on $1.26 billion in loans were at least 90 days late. That was up by 16 percent, or $177 million, from the end of June.

Despite the darkening clouds in the mortgage market, analysts still found bright spots in Wells Fargo’s report.

For instance, the bank’s deposits rose 13 percent to $306 billion, providing a cheap source of money to make future loans. If not for the effect of currency conversions, Wells Fargo said its deposits would have been up by 11 percent.

Wells Fargo also benefited from more deposit account fees, which rose 18 percent from last year to $837 million.