NEW YORK – Wells Fargo, the largest U.S. home lender, said third-quarter profit climbed 13 percent to a record as fewer loan defaults helped overcome weakness in new mortgage lending. The shares fell in early trading as revenue came in less than some analysts predicted.
Net income advanced to $5.58 billion, or 99 cents a share, from $4.94 billion, or 88 cents, a year earlier, the San Francisco-based company said Friday.
Chief Executive Officer John Stumpf, 60, reclaimed $900 million from loan-loss reserves as an improving economy and rising home prices made it easier for borrowers to repay. Wells Fargo continued adding to its three-year string of record profits even as JPMorgan Chase, its biggest rival, failed to keep pace by posting a $380 million quarterly loss Friday.
The combination of lower credit costs and non-interest expense is enough to overwhelm a significant decline in mortgage origination revenues, John McDonald, an analyst at Sanford C. Bernstein in New York, wrote in a Sept. 30 report. McDonald rates the shares to outperform and predicts the stock will reach $46 within the next 12 months.