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Wells Fargo profit rises 1.7% as mortgage business steadies

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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. - PHOTO: BLOOMBERG

[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.

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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