Wells Fargo profit rises as mortgage business steadies

I'd still be buying WFC: Analyst
I'd still be buying WFC: Analyst

Wells Fargo, the fourth largest U.S. bank and biggest mortgage lender, reported a 1.7 percent rise in third-quarter profit as its mortgage business became less of a drag.

Wells Fargo reported quarterly earnings and revenue that were in line with analysts' expectations on Tuesday. After the earnings announcement, the company's shares edged lower in premarket trading. (Get the latest quote here.)

The company posted third-quarter earnings excluding items of $1.02 per share, up from 99 cents a share in the year-earlier period.

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Revenue increased to $21.21 billion from $20.48 billion a year ago.

Wells Fargo CFO John Shrewsberry will be on CNBC's "Closing Bell" at 3:10 p.m. ET

Wall Street analysts had expected Wells Fargo to deliver earnings of $1.02 a share on $21.10 billion in revenue, according to a consensus estimate from Thomson Reuters.

"I think Wells did pretty good relative to everybody else out there," Paul Miller, managing director of FBN Capital, said on "Squawk Box." "I mean, it's a big institution. It's hard to move the needle on a lot of these guys."

Tuesday marks the first day of third-quarter earnings reporting for the big banks. So far this year, shares of Wells Fargo, the fourth biggest bank by assets, have risen by 10 percent and eclipsed the growth of the S&P 500.

Mortgage lending rose by $1 billion from the second quarter to $48 billion, though new home loans were 40 percent below the level in the third quarter of 2013. Income from mortgage banking rose 2 percent to $1.63 billion as Wells Fargo earned bigger profits from selling home loans to investors.

A drop in refinancing activity beginning in the summer of 2013 caused mortgage banking income to plunge for four consecutive quarters.

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Overall revenue was up 3.6 percent to $21.21 billion on a 2 percent increase in net interest income and a 6 percent rise in fee income, most of which came from higher trust and investment fees.

Wells Fargo's loan portfolio grew by 3.7 percent to $838.9 billion in the quarter from the same period a year earlier, led by a 13 percent increase in commercial and industrial loans. Excluding balances the bank is liquidating, loans grew 7 percent from a year earlier.

Expenses were up 1.2 percent to $12.2 billion as legal costs and foreclosure expenses increased.

Reuters contributed to this report.