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[London] Wells Fargo & Co reported a 1.7 per cent rise in third-quarter profit, helped by a slight increase in income at its mortgage banking unit, which had been a big drag on results for much of the last year.
The fourth-largest US bank's net income applicable to common shareholders rose to US$5.41 billion, or US$1.02 per share, in the quarter, it said on Tuesday, in line with analysts'expectations. A year ago, it posted profit of US$5.32 billion, or 99 cents per share.
Income from mortgage banking rose 2 per cent to US$1.63 billion as Wells Fargo posted bigger profits from selling home loans to investors. Mortgage lending rose by US$1 billion from the second quarter to US$48 billion, though new home loans were 40 per cent below the level in the third quarter of 2013.
A drop in refinancing activity beginning in the summer of 2013 caused mortgage banking income to plunge for four consecutive quarters.
Buoyant stock markets also boosted profits as it exited some venture capital investments. Earnings tied to gains in equity investments rose 42 per cent to US$712 million.
The bank reported mixed progress on three major growth initiatives: credit cards, wealth management and investment banking. Credit card balances rose 11 percent to US$28.3 billion from the third quarter of 2013, but the pace of new account growth slowed.
Profits at Wells Fargo's wealth, brokerage and retirement segment rose 22 per cent from a year earlier to US$550 million, but investment banking fees fell 7 per cent to US$371 million over the same period.
Overall revenue was up 3.6 per cent to US$21.21 billion on a 2 per cent increase in net interest income and a 6 per cent rise in fee income, most of which came from higher trust and investment fees.
Wells Fargo's loan portfolio grew by 3.7 per cent to US$838.9 billion in the quarter from the same period a year earlier, led by a 13 per cent increase in commercial and industrial loans. Excluding balances the bank is liquidating, loans grew 7 per cent from a year earlier.
Expenses were up 1.2 per cent to US$12.2 billion as legal costs and foreclosure expenses increased.
Shares fell 1.7 per cent to US$49.33 in morning trading. Since the start of the year, Wells Fargo stock is up 10.6 per cent, making it the best performer in the KBW index of bank stocks. REUTERS