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October 11, 2013 at 10:56 AM
Wells Fargo (WFC) said its net income rose 13% year over year in the third quarter, despite a 42% drop in its mortgage banking income.
But while the third-quarter decline in mortgage originations is a “significant negative,” it’s not lethal, according to Richard Bove, vice president of equity research at Rafferty Capital.
“From an operating standpoint, the company is doing actually pretty well,” Bove said on CNBC. “And therefore I don’t think one has to worry about the fact that refinancing mortgages caused some difficulty in this quarter.”
Wells Fargo reported net income of $5.6 billion, or $0.99 a share, vs. $4.9 billion, or $0.88 a share, last year. Analysts had estimated Wells Fargo would earn $0.97 per share. Revenue was $20.5 billion, compared with $21.4 billion in the second quarter of 2013.
Wells Fargo made $80 billion in home loans, down from $139 billion last year, and mortgage banking income fell 43% to $1.61 billion.
Scott Siefers, a bank analyst at Sandler O’Neil & Partners says the good news is that Wells Fargo beat estimates, the credit environment is improving and its expenses are down.
(Also on Friday, JPMorgan (JPM) reported its first quarterly loss under CEO Jamie Dimon after incurring $9.2 billion in legal expenses.)
“Wells Fargo continued to demonstrate strong and consistent financial performance in the third quarter,” said Chairman and CEO John Stumpf, in a press release. “As our economy continues to transition to higher interest rates, our diversified business model and strong risk discipline contributed to record earnings per share along with continued strength in return on assets, return on equity and capital.”
