NEW YORK — Wells Fargo & Co.'s (WFC) first-quarter profit rose 13% as the giant bank was bolstered by a surge in mortgage banking and set aside less money to cover loan losses.
The San Francisco-based bank, the nation's largest mortgage lender, originated $129 billion of mortgages in the first quarter, up from $120 billion in the fourth quarter and $84 billion a year earlier.
Wells Fargo, which has benefited from a pullback in mortgage activity from rivals such as Bank of America Corp. (BAC), posted $2.9 billion in mortgage banking non interest income, up 42% from $2 billion in the year-earlier period. The bank also experienced a big spike in mortgage applications, which rose 20% from the fourth quarter, as refinancings accounted for 76% of that total.
With a smaller capital markets business than its big bank peers, the West Coast-based bank is more closely watched in the investment community for its mortgage banking results.
The bank though also set aside $430 million for mortgage loan repurchase losses, up from $404 million in the prior period.
Wells Fargo, the nation's fourth largest bank by assets, joined rival J.P. Morgan Chase & Co. (JPM), in kicking off bank earnings season and in beating analysts' estimates.
Shares of Wells Fargo though fell 1.5% to $33.52 amid a down stock market on Friday. The stock has climbed 22% year-to-date.
Overall, Wells Fargo posted a profit of $4.25 billion in the first quarter, up from a year-earlier profit of $3.76 billion. Per-share earnings, reflecting the payment of preferred dividends, rose to 75 cents from 67 cents a year ago, topping the 73 cents expected by analysts polled by Thomson Reuters.
Revenue increased 6.4% to $21.64 billion, the company's highest revenue in nine quarters. Analysts were looking for $20.51 billion.
In its lending business, Wells Fargo's loan growth appeared to slow though, as its core loans grew just 0.1% from the prior period as the bank said it experienced "seasonally lower credit card balances, a decline in commercial real estate, and continued runoff in the home equity portfolio." Excluding a $4.1 billion run-off in Wells Fargo's non-strategic/liquidating portfolio though, the firm said loans in the core portfolio grew by $984 million.
Net charge-offs, or loans lenders don't think are collectible, fell to 1.25% of average loans, compared with 1.73% a year earlier and 1.36% in the fourth quarter.
Wells Fargo's expenses rose to $13 billion in the quarter up from $12.5 billion, a year ago as the bank had higher personnel costs, but also booked $314 million in litigation expenses for various legal matters.
Credit-loss provisions totaled $2 billion, down from $2.21 billion a year earlier and $2.04 billion in the fourth quarter.
