Wells Fargo benefits from housing market, but clouds loom
By Peter Rudegeair
(Reuters) - Wells Fargo & Co (WFC.N: Quote), the biggest U.S. mortgage lender, posted a higher-than-expected 20 percent rise in quarterly profit on Friday as it set aside less money to cover bad loans and earned more from its mortgage business.
The results reflect the strengthening U.S. housing market, which is cutting the bank's expenses for items such as managing foreclosed homes. Income from making home loans rose 9 percent from a year earlier.
Mortgage lending gains may slow in coming quarters, analysts said. Mortgage interest rates have risen in recent months as longer-term bonds have sold off, which will likely cut into future mortgage lending profit.
Wells Fargo Chief Executive John Stumpf said on a conference call that the bank is diversified and has some businesses that perform better when rates rise.
The fourth-biggest U.S. bank by assets said net income applicable to common stockholders rose to $5.27 billion, or 98 cents per share, in the second quarter from $4.40 billion, or 82 cents per share, a year earlier.
Analysts had expected 93 cents per share, according to Thomson Reuters I/B/E/S. It was the bank's 14th consecutive quarter of higher earnings per share.
(For a Wells Fargo earnings graphic, click on link.reuters.com/zyc69t)
The bank's provision for bad loans fell 64 percent to $652 million. Continued...