Wells Fargo Comes Up Short

While Wells Fargo (NYSE:WFC) saw its third-quarter profit jump 22 percent and beat Wall Street expectations, revenue for the United States’ fourth-largest bank by assets was below projections.

“Through the efforts of our more than 265,000 team members, we’ve now achieved six consecutive quarters of record net income and EPS,” Chairman and CEO John Stumpf said in a statement.

The bank reported a profit of $4.94 billion, an increase from last year’s third-quarter profit of $4.06 billion. Earnings per share were 88 cents, up from 72 cents last year, and revenue increased 8.1 percent to $21.21 billion. However, analysts polled by Thomson Reuters expected earnings per share of 87 cents on a revenue of $21.47 billion.

Furthermore, the bank’s net interest margin was 3.66 percent, down from 3.84 percent last year.

As Wells Fargo has a smaller capital-markets business than the larger banks in the financial sector, analysts were most anticipating Wells Fargo’s mortgage banking results, according to the Wall Street Journal. In its quarterly financials, the bank said it originated $139 billion of mortgages in the third quarter, compared with $131 billion in the second quarter, and its mortgage banking non-interest income increased 53 percent from last year, to $2.81 billion.

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However, while the bank’s credit strengthen over the past quarter, its credit-loss provisions decreased. For the third-quarter, provisions amounted to $1.59 billion, down from $1.81 billion a year earlier. Net charge-offs, loans lenders think are not collectible, were 1.21 percent of average loans; last year they totaled 1.37 percent.

While Wells Fargo reported a decrease in net charge-offs for the quarter, the bank is still embroiled in a lawsuit brought by the federal government this week. The bank, the biggest U.S. mortgage lender, is accused of “reckless” lending and leaving a federal insurance program to pick up the tab

Shares in the bank were down 2.2 percent to $34.45 in pre-market trading following the report. The stock has gained 31 percent over the past 12 months through Thursday.

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