* Wells reports record $4.9 billion profit
* Bank tops analysts' estimates on EPS, misses on revenue
* Net interest margin falls on low rates
(Adds details on shares, mortgages, net interest margin,JPMorgan)
By Rick Rothacker
Oct 12 (Reuters) - Wells Fargo & Co reported a 22percent increase in its third-quarter profit on Friday on asurge in mortgage lending, but fell short of analysts' revenueestimates.
Shares in the fourth largest U.S. bank dropped 3.3 percentto $34.02 in premarket trading.
Wells Fargo posted earnings per share of 88 cents, toppingthe analysts' consensus estimate of 87 cents, according toThomson Reuters I/B/E/S. But total revenue of $21.2 billionmissed the $21.47 billion that analysts had expected.
Net income in the quarter was a record $4.9 billion.
The largest U.S. home lender reported that mortgage bankingrevenue jumped more than 50 percent from a year ago to $2.8billion. The bank said it held on to some loans it could havesold to Fannie Mae and Freddie Mac , givingup $200 million in potential fee income.
Banks are experiencing a jump in home lending as borrowersrefinance their homes at low interest rates. Wells made $139billion in mortgages versus $89 billion a year ago, but up onlyslightly from the second quarter.
The bank's net interest margin - the spread it makes on whatit pays on deposits and makes on loans - fell to 3.66 percentfrom 3.91 percent in the second quarter, a bigger drop than ithad warned of last month. Banks are seeing the margin shrink asolder loans with higher interest rates are paid down.
The bank blamed the margin decline on a drop in fee incomecompared with the second quarter, a cautious approach in itsinvestment portfolio and low interest rates.
Wells Fargo reported its results on the same day as JPMorganChase & Co , launching the earnings season for big banks.Profits at JPMorgan Chase, the largest U.S. bank. rose 34percent to a record $5.71 billion.
(Reporting By Rick Rothacker in Charlotte, N.C.; Editing byJeffrey Benkoe)
Keywords: WELLSFARGO EARNINGS/