Wells Fargo 3Q Profit Climbs 13%

Wells Fargo (NYSE:WFC) said Friday its third-quarter net income climbed 13%, as lower provisions for bad loans overshadowed weaker results from the bank’s mortgage business.

The company’s profit rose to $5.58 billion from $4.94 billion in the year-ago period. On a per-share basis, earnings checked in at 99 cents, compared to 88 cents last year, to beat Wall Street expectations for 97 cents.

Revenue fell 3.5% to $20.48 billion, missing calls for $20.97 billion. Non-interest expense remained roughly level at $12.1 billion.

As the nation’s largest mortgage lender, Wells Fargo is considered to be a bellwether for the housing market. It had said mortgage originations would decline in the third quarter amid higher interest rates that weighed on refinancing activity.

Home lending originations did fall to $80 billion, 42% below the prior year’s $139 billion. The banking giant reported $112 billion in second-quarter mortgage originations.

Applications declined to $87 billion from $188 billion last year and $146 billion in the prior quarter.

Mortgage banking non-interest income tumbled 43% year-over-year to $1.61 billion.

Earlier Friday, rival JPMorgan Chase (NYSE:JPM) reported a 14% decline in mortgage originations, even as the top bank by assets saw a 13% rise in mortgage banking profit.

“As expected, mortgage banking revenue was lower in the quarter as the recent increases in interest rates reduced refinance volume, but this impact was partially offset by improved credit and lower expenses,” Chief Financial Officer Tim Sloan said in a statement.

Wells Fargo’s net charge-offs, or loans considered to be uncollectible, was down to 0.48% of average loans, compared to 1.21% a year earlier and 0.58% last quarter.

Its provision for credit losses was just $75 million versus $1.59 billion last year, showing improved credit quality that helps boost earnings.

Net interest margin narrowed to 3.38% from 3.66%.

Wells Fargo did see a $10.4 billion increase in total loans, which ended the quarter at $812.3 billion.

The community banking segment’s profit jumped 22% to $3.34 billion. Earnings from wholesale banking, which lends to corporations and includes a small investment banking business, fell 1% to $1.97 billion.

Shares were down 1.9% at $40.66 Friday morning, paring year-to-date gains of 21.2% as of Thursday’s close.