Wells Fargo Profit Growth Slows on Credit Pressures
Wells Fargo & Co. Tuesday reported a smaller-than-normal 4 percent increase in third-quarter profit, hurt by credit pressures from mortgage, home equity and auto loans.
Net income rose to $2.28 billion, or 68 cents per share, from $2.19 billion, or 64 cents, a year earlier. Revenue rose 10 percent to $9.85 billion. Results included a $160 million gain from the sale of $27 billion of low-yielding mortgage securities.
Analysts on average expected profit of 70 cents per share on revenue of $10.02 billion. Wells Fargo usually posts double-digit gains in quarterly profit per share.
"Given the severe disruption in the credit markets, it was a challenging quarter to be sure," Chief Executive John Stumpf said in a statement.
San Francisco-based Wells Fargo joins other large U.S. banks to report higher credit losses, which are mounting industrywide from exposure to mortgages and other loans.
The bank's net interest margin tumbled to 4.55 percent from 4.89 percent in June. Wells Fargo said it bought $17 billion of securities late in the quarter, which it said should benefit the margin in the fourth quarter.
Net credit losses increased 24 percent from the second quarter to $892 million. It said almost half of the increase was in home equity, hurt by declining home prices, with the rest in auto loans and unsecured consumer credit.
"We're not immune to the evolving slowdown in the housing sector," Chief Financial Officer Howard Atkins said in a statement.
Shares of Wells Fargo were down almost 4 percent Tuesday after closing Monday at $35.95 on the New York Stock Exchange. Through Monday, Wells Fargo shares had risen 1 percent this year, compared with a 10 percent drop in the Philadelphia KBW Bank Index.