Wells Fargo profits rise but new mortgages weaker

Wells Fargo Friday reported a 22 percent increase in quarterly earnings on improving credit quality, but said its pipeline of new mortgages was slowing.

Net income for the quarter rose to $5.2 billion on $21.3 billion in revenues, compared with $4.2 billion on revenues of $21.6 billion in the year-earlier period.

The bank, the largest US mortgage originator, reported improving credit quality as the housing market steadies. Wells Fargo reduced its provision expense to $1.2 billion in the quarter, from $2 billion in the year-earlier quarter.

The bank's non-performing assets declined to $22.9 billion, compared with $26.6 billion a year ago.

"We believe that the housing market will continue to improve" and that it should be positive for the economy and the bank's results, said chief financial officer Timothy Sloan on a conference call.

The San Francisco banking giant reported $800 billion in loans outstanding, up $33.5 billion from the year-ago quarter.

But there were some signs of weakening in its key mortgage business. Non-interest net income in mortgage banking fell 2.6 percent from the year-ago level.

New mortgage applications were down 23.4 percent and mortgage originations were off 15.5 percent.

Sloan said the company had anticipated the decline in mortgage originations.

"The mortgage business is still very strong," Sloan said. "We started this quarter with a pretty strong pipeline."

Wells Fargo shares were off 1.7 percent in midday New York trade.