Wells Fargo Q3 Profit Climbs 13%, Mortgage Banking Income Drops
(RTTNews.com) - Wells Fargo & Co. (WFC) Friday reported a 13 percent increase in profit for the third quarter, despite lower revenues, amid a sharp drop in loan loss provisions. However, the home loan giant's Mortgage banking income fell 43 percent from the prior year.
Chairman and CEO John Stumpf said, "Wells Fargo continued to demonstrate strong and consistent financial performance in the third quarter. As our economy continues to transition to higher interest rates, our diversified business model and strong risk discipline contributed to record earnings per share along with continued strength in return on assets, return on equity and capital.''
According to Stumpf, the improvement in the housing market has been beneficial to the company's customers and significantly contributed to Wells Fargo's broad-based credit improvement in the quarter.
Wells Fargo's net income applicable to common stock increased to $5.317 billion from $4.717 billion in the prior year. Earnings per share rose to $0.99 from $0.88.
On average, 32 analysts polled by Thomson Reuters expected earnings of $0.97 per share for the quarter. Analysts' estimates typically exclude special items.
Revenue for the quarter dropped to $20.5 billion from $21.2 billion in the prior year. Wall Street expected revenues of $20.97 billion.
Sequentially also, revenue declined, primarily due to lower mortgage banking revenue and trust and investment fees, partially offset by higher market sensitive revenue and other income.
Net interest income rose 1 percent to $10.748 billion, while noninterest income dropped 8 percent to $9.73 billion.
Mortgage banking income fell 43 percent to $1.61 billion, but Trust and investment fees climbed 11 percent to $3.28 billion. Net gains from trading activities declined 25 percent to $397 million.
Segment-wise, Community Banking revenues fell 7 percent to $12.244 billion due to lower mortgage banking revenue, while net income increased 22 percent to $3.341 billion.
Consumer Lending Group's home lending originations were $80 billion, compared to $139 billion last year.
Wholesale Banking revenues were down 1 percent at $5.871 billion and profit slid 1 percent to $1.97 billion, as business growth and strong loan and deposit growth was more than offset by lower sales and trading, PCI resolution income and other income.
Provision for credit losses declined sharply to $75 million from $1.59 billion. Net charge-offs were $975 million, down $1.4 billion from last year. Net interest margin was 3.38 percent compared to 3.66 percent last year.
The quarter saw $900 million in reserve release, representing the amount by which net charge-offs exceed the provision for credit losses, due to continued strong credit performance and improved housing market.
Larger rival, JPMorgan Chase & Co. (JPM) Friday reported a loss for its third quarter compared to a profit last year, reflecting mainly higher legal expenses. The company generated lower revenues, while loan loss provisions were reduced significantly.
WFC is down 2 percent in early morning trading at $40.60.
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