Wells Posts Record Earnings; Mortgage Pipeline Down 45 Percent from Q2

Wells Fargo Bank reported record net income for the third quarter of $5.6rnbillion, a 13 percent increase from the same quarter in 2012 even though risingrninterest rates hurt its mortgage banking revenue.  The company said its diluted per sharernearnings were also a record, $0.99 per share, another 13 percent increase.  For the first nine months of 2013, net incomernwas a record $16.3 billion,rnor $2.89 per share,rncompared with $13.8rnbillion, or $2.45 per share, for the same periodrnin 2012.</p

(NOTE:  While Wells Fargo’s financialrntables provided comparisons between Q3 2012 and Q3 2013 many of the comparisonsrnin the report itself are with Q2, 2013. rnThus in the summary below it is important to note the relevant periods.)</p

Revenue was $20.5 billion,rncompared with $21.4 billionrnin second quarter 2013.  Interestrnincome totaled 11.78 billion, a 1 percent decrease from a year earlier butrntotal interest expenses decreased 19 percent to 1.028 billion and provision forrncredit losses were down 95 percent to $75 million.  This put net interest income at 10.67 billion,rnan 18 percent increase over Q3 2012. rnContributing to the increase as well were available-for-sale (AFS) securities portfoliornpurchases consisting largely of agency mortgage-backed securities (MBS), lower funding costs, organic growth in commercial and consumer loans,rncommercial real estaternloan acquisitions, and onernadditional business day in the quarter.   These benefits were offset by lower interestrnincome from mortgages held for sale and reduced incomernfrom several other sources. </p

Mortgage Banking Income fell from $2.81 billion in thernthird quarter of 2012 to $1.61 billion, a decrease of 43 percent.  Residential mortgage originations in thernthird quarter were $80 billion compared to $112 billion in the second quarterrnof this year.  The Bank provided $28 millionrnfor mortgage loan repurchase losses, compared with $65 million in secondrnquarter 2013.  </p

Declines in the mortgage sector and trust and investmentrnfees were partially offset by increases in debt and equity gains, mortgagernservicing income and trading revenues. rnThis brought total non-interest income in at $9.73 billion, down 18rnpercent from $10.55 billion in the third quarter of 2012.</p

“Wells Fargo continued to demonstrate strong and consistent financial performance in the third quarter,” said Chairmanrnand CEO John Stumpf.rn”As our economyrncontinues to transition to higher interestrnrates, our diversified business model and strong risk discipline contributed to record earnings per share along with continued strengthrnin return on assets,rnreturn on equityrnand capital. The improvement in the housingrnmarket has been beneficial to our customers and significantly contributed to our broad-based creditrnimprovement in the quarter. We also deepenedrnrelationships, resultingrnin increases in cross-sell across thernCompany. As we look forward,rnwe remain well positioned to meet the needs of ourrncustomers and to perform for our shareholders.”</p

Chief Financial Officer Tim Sloan said, “This was a solid quarter for Wells Fargo.rnAs expected, mortgagernbanking revenue was lower in the quarterrnas the recentrnincreases in interest rates reducedrnrefinance volume,rnbut this impact was partially offset by improved creditrnand lower expenses. Year-over-year, we had strongrnloan growth, double-digit increases in noninterest income across many of our businesses and continuedrnto build capital and return more to shareholders throughrndividends and share buybacks.”</p

The companyrnnoted continued improvement in credit quality with net charge-offs of $975rnmillion compared to $1.4 billion the previous year, and non-performing assetsrndown $4.6 billion to $20.7 billion.  Thernstrong credit performance allowed a $900 million reserve release.  </p

The $80rnbillion in mortgage loan originations noted above resulted from applicationsrnfor $87 billion in mortgage financing compared with $146 billion inrnapplications in the second quarter.  ThernBank had $35 billion in applications in the pipeline at the end of the quarter,<bdown 45 percent from $63 billion on June 30, 2013. </p

Thernresidential mortgage servicing portfolio totaled $1.8 trillion with a ratio ofrnMSRs to related loans serviced for others of 82 basis points compared to 81 inrnthe prior quarter.  Loans in thernservicing portfolio had an average note rate of 4.54 percent compared to 4.59rnpercent the previous quarter.

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