A Wells Fargo sign is displayed at a branch in New York earlier this year.
Wells Fargo reported $4.9 billion of profit in the third quarter, a 22 percent jump on the back of a booming mortgage business.
The San Francisco-based bank continues to churn out record profits, with 11 straight quarters of net income gains. The results of 88 cents a share narrowly beat the estimates of analysts polled by Thomson Reuters, who forecast earnings of 87 cents a share.
The bank increased revenue as well, sidestepping a common sore spot that has plagued most of the nation’s biggest banks. Wells Fargo recorded $21.2 billion in revenue, surpassing $19.6 billion a year earlier.
The bank’s lending division helped drive growth, as consumers refinanced their mortgages amid record low interest rates. Wells Fargo, the nation’s largest mortgage lender, also benefited from its relatively modest exposure to the volatile investment banking business.
“We saw continued strength in our mortgage and deposit businesses,” the bank’s chief executive, John G. Stumpf, said in a statement.
Wells Fargo and JPMorgan Chase kicked off bank earnings season Friday. The nation’s other big banks, including Goldman Sachs and Bank of America, will report their results next week.
The Wells Fargo story line — that a deep lending effort breeds success — is rooted in broad federal stimulus efforts that have propped up the mortgage industry.
A Treasury initiative is spurring refinancing activity. And the Federal Reserve has introduced a long-term plan to buy large batches of mortgage-backed bonds, which should help keep rates low.
Wells Fargo, more than five years after the mortgage crisis, has seized the opportunity. Total outstanding loans jumped slightly to $783 billion while the bank’s home mortgage originations soared 56 percent to $139 billion. The demand for credit came largely from refinancing, which accounted for 72 percent of all home loan applications.
Like other big banks, Wells Fargo makes home loans before turning around to sell most of them to investors after attaching a government guarantee. Those gains totaled $2.61 billion in the third quarter, up 225 percent from $803 million in the third quarter of last year.
The refinancing boom is fueling profits. Wells Fargo’s profit in the community banking division, which includes Wells Fargo’s retail branches and mortgage business, climbed 18 percent to $2.7 billion.
Despite the gains, the mortgage crisis continues to haunt Wells Fargo. The bank this summer agreed to pay $175 million to settle Justice Department accusations that it discriminated against certain minority homeowners from 2004 to 2009. Wells Fargo, which denied the charges, was also sued this week by federal prosecutors in New York, who said the bank defrauded the government and lied about the quality of the mortgages it handled under a federal housing program.
Still, the legal troubles will barely nick the bank’s bottom line.
Like JPMorgan, Wells is experiencing growth beyond mortgages. Wholesale banking, which includes the sales and trading business along with the corporate lending division, increased its profit by 11 percent to $1.9 billion. While the unit operates in the shadow of the Wall Street investment banks, Wells Fargo has gradually extended its reach in that area.
“By focusing on earning all of our customers’ business and providing outstanding service, we continued to generate growth across our diversified set of businesses,” Stumpf said.MORE IN World/National BusinessSAN FRANCISCO — Google is refining its famous logo as it prepares to become a part of a new... Full StoryPROVIDENCE, R.I. Full StoryANN ARBOR, Mich. — India’s largest SUV maker is ready to make its debut on U.S. roads. Full Story
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