Wells Fargo's earnings edge up 1 percent to $5.4 billion

AP News
|
Posted: Oct 14, 2015 4:38 PM
Wells Fargo's earnings edge up 1 percent to $5.4 billion

NEW YORK (AP) — Wells Fargo reported a slight gain in third-quarter earnings on Wednesday, helped by an increase in borrowing from consumers and businesses.

The San Francisco-based bank earned $5.44 billion after payments to preferred shareholders, or $1.05 a share, for the three-month period ending in September. That compares with a $5.41 billion, or $1.02 a share, in the same period a year earlier.

Wells Fargo reported loan growth across all of its major businesses, from commercial and industrial loans to residential mortgages. Wells is often seen as a bellwether for the housing market because it is the largest mortgage lender in the U.S. The bank originated $55 billion in mortgages in the last quarter.

Like JPMorgan and Bank of America, Wells reported a noticeable increase in deposits, which rose 6 percent to $1.2 trillion.

The profit Wells Fargo is making from lending is declining, however. Net interest income, or the difference between what Wells Fargo charges to lend and what it pays depositors, fell to 2.96 percent from 3.06 percent in the same period a year earlier. Wells and Bank of America are hurt more by low interest rates than some other banks because both companies do not have large investment bank and trading businesses.

Wells Fargo did report some credit deterioration in the loans it made to the oil and gas industry, similar to the issues that JPMorgan had, and had to hold onto reserves this quarter instead of releasing them. Low commodity prices have indirectly impacted Wells and JPMorgan because both companies, like many other banks, lent money to oil and gas companies who are now struggling due to lower oil prices.

The bank's revenue rose to $21.9 billion from $21.2 billion a year earlier. Wells Fargo's results came in mostly in line with analysts' forecasts of earnings of $1.05 per share on $21.8 billion in revenue.

Wells Fargo & Co. has been diversifying into other businesses beyond mortgage lending and retail banking. The company recently announced it would purchase General Electric's commercial lending business, which has roughly $32 billion in loans.

Wells Fargo's stock fell 36 cents, or 1 percent, to close at $51.50.