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Wells Fargo first quarter profit jumps 14%, beating expectations

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California's banking giant, Wells Fargo & Co., reported 14% higher first quarter earnings, powering well beyond Wall Street's expectations as declining loan losses and operating cost cuts offset the slowdown in mortgages at America's largest home lender. 

San Francisco-based Wells Fargo, the fourth-largest U.S. bank by assets, said it earned $5.89 billion, $1.05 per share. That compared to $5.17 billion, 92 cents a share, in last year’s first quarter. Revenue declined 3% to $20.63 billion.

The consensus of financial analysts had been for per-share earnings of 97 cents on revenue of $20.6 billion, according to a Thomson-Reuters poll.

Wells Fargo's stock price rose by 98 cents, or 2%, to $48.69 in early trading on a day that bank shares were challenged by disappointing earnings from the largest bank, bellwether JPMorgan Chase & Co. JPMorgan shares were off 3% in early trading.

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Higher interest rates have choked off a mortgage refinancing boom, and rising home prices have raised questions about housing affordability in certain areas, including Southern California. 

Because Wells Fargo is the biggest residential mortgage maker, its earnings are always watched closely as indicators for the nation's housing markets, and the first quarter tidings were not cheery. 

Wells Fargo said it originated $36 billion in new mortgages in its latest quarter, down from $109 billion a year earlier and $50 billion in the fourth quarter of 2013.

Nonetheless, Wells Fargo Chief Executive John Stumpf said he was pleased at growth in deposits and lending.

Stumpf noted that households banking at Wells Fargo averaged 6.17 financial products, up from 6.1% a year earlier. The bank touts its prowess in "cross-selling" accounts and add-ons, though many branch employees have told The Times that workers often are pressured into engaging in unethical practices to achieve their goals. 

The bank's results were boosted by a large one-time tax benefit and by the release of $500 million held in reserves -- funds Wells Fargo said it had determined would not be needed to offset losses.

Nonperforming assets, which include non-paying loans and foreclosed properties, declined by $840 million from the fourth quarter to $18.8 billion.

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Copyright © 2014, Los Angeles Times
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