Fourth-quarter profit for Wells Fargo & Co., the biggest U.S. mortgage lender, jumped 11 per cent as a steep drop in mortgage lending was offset by increased interest income.
EARNINGS: Net income after dividend payments on preferred stock rose to $5.4 billion in the October-December period from $4.9 billion a year earlier. On a per-share basis, earnings were $1, slightly above the 99 cents forecast by Wall Street analysts.
Fourth-quarter revenue fell to $20.7 billion from $21.9 billion.
HOW IT HAPPENED: The rise in rates on U.S. mortgages in the latter part of last year continued to have a negative impact on Wells Fargo’s mortgage business.
The San Francisco-based bank, which is the fourth-largest U.S. bank by assets, controls about a third of the U.S. mortgage market. Much of its lending business has been coming from mortgage refinancing, which was reduced by the spike in interest rates.
Wells Fargo funded $50 billion worth of mortgages in the fourth quarter, down from $125 billion a year earlier. The bank has cut about 5,700 jobs, most of them related to its mortgage business, since the end of September.
At the same time, net interest income increased $55 million to $10.8 billion as the bank earned more on the securities it held and from trading.
Wells Fargo’s stock fell 49 cents, or 1.1 per cent, to $45.07 in early trading.
Wells Fargo CEO John Stumpf says the improving prospects for the U.S. economy will help the bank perform strongly this year.