Wells Fargo & Co, the biggest U.S. mortgage lender, reported a better-than-expected 11 per cent rise in fourth-quarter profit as bad-loan provisions fell steeply, helping to make up for a big drop in mortgage lending.
Net income applicable to common shareholders rose to $5.37-billion, or $1.00 per share, from $4.86-billion, or 91 cents per share, a year earlier, the fourth-biggest U.S. bank said on Tuesday.
Analysts on average had expected earnings of 98 cents per share, according to Thomson Reuters I/B/E/S.
Provision for credit losses fell 80 per cent to $363-million, helping to offset a 49 per cent drop in mortgage income to $1.57-billion.
Wells Fargo’s shares were down 0.3 per cent at $45.35 before the opening bell on the New York Stock Exchange.
The stock rose 28.7 per cent in 2013, lagging the 34.3 per cent increase in the KBW index of bank stocks. The bank had a market value of $243.2-billion at the end of the year, making it the largest U.S. bank by that measure.
The San Francisco-based bank’s mortgage business took a hit from a slowdown in refinancing activity, which dropped by nearly a third in the quarter according to the Mortgage Bankers Association.
Wells Fargo had $25-billion of mortgage applications in the pipeline at the end of the quarter, down from $35-billion at the end of the third quarter.
The bank, whose total revenue fell about 6 per cent to $20.7-billion, accounted for more than one out of every five U.S. home loans in the first half of 2013, according to industry publication Inside Mortgage Finance.
Wells Fargo is also the top U.S. lender for autos, small business and commercial real estate.
JPMorgan Chase & Co also reported a better-than-expected adjusted quarterly profit on Tuesday as the biggest U.S. bank kept a lid on costs and set aside less money to cover bad loans.