Wells Fargo profit rises 22% despite slower mortgage lending
Wells Fargo & Co.‘s quarterly profit jumped 22%, beating expectations, despite a fall-off in the mortgage business, which generates a quarter of all revenue at the San Francisco banking giant.
The quarter was marked by cost-cutting, fewer loan losses and growth in loans and deposits. Revenue declined slightly, reflecting pinched profit margins on lending at a time of record-low interest rates.
Wells Fargo raised its quarterly dividend and, having passed its regulatory stress test, plans “to return even more capital to shareholders in the year ahead,” John Stumpf, the bank’s chairman and chief executive, said in announcing the results Friday morning.
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Net income for the first three months of 2013 totaled $5.17 billion, or 92 cents a share, compared with $4.25 billion, or 75 cents a share, in the year-earlier quarter. Analysts had expected 88 cents a share. Revenue fell from $21.6 billion to $21.3 billion, coming up short of what Wall Street had anticipated.
Mortgage originations, applications submitted and loans in the pipeline were all at a yearly low for Wells Fargo, although the profit it recorded when it sold mortgages was significantly higher than in most of 2012.
Analysts are carefully watching the home lending business, in which Wells is by far the nation’s largest originator and provider of customer service.
A boom in refinance loans is gradually tailing off and purchase lending has remained sluggish in the industry despite rising housing prices and the Federal Reserve’s success at driving down interest rates.
On a positive note, Wells Fargo said its home-purchase lending, while still far less than refinances, increased by 31% year-over-year.
Back in 2009, 30-year mortgage rates spent much of their time above 5%, while Wells Fargo shares dipped below $9. Since then, mortgage rates have zig-zagged down to recent readings in the 3.5% area, while Wells’ stock has remained above $35 since late February.
In early trading Friday Wells shares were down 22 cents at $37.29.
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