America’s fourth largest bank in term of assets and leading mortgage lender, Wells Fargo & Company (NYSE: WFC) reported better-than-expected fiscal fourth-quarter results on Friday. Wells Fargo’s results are often regarded as precursor on the banking industry’s performance and growth in mortgage lending.
Both top line and bottom line were bolstered by strong loan growths, lesser amount of money set aside for bad loans and higher fees charged for mortgaged loans.
For the quarter, the Company reported net income of $5.09 billion or 91 cents a share compared to profit of $4.11 billion or 73 cents a share, in the year earlier quarter. The latest quarter’s results included a net charge of $0.01 a share linked to the foreclosure review costs, equity gains and other items.
Analysts polled by Thomson Reuters, on average, were anticipating earnings of 88 cents a share on revenue of $21.29 billion.
The bank said that fees from mortgages rose to $3.1 billion from $2.4 billion a year ago as U.S. consumers continued to take advantage of record low interest rates to refinance their home purchases. During the fourth quarter, Wells Fargo issued $125 billion in mortgages, down from its third quarter when the bank issued $139 billion in mortgages.
The provision for bad loans fell to $1.83 billion compared to $2.04 billion set aside against loan losses in the same period of last year as borrowers continued to make timely payments, said the bank.
Commenting over results, Wells Fargo’s Chief Financial Officer, Tim Sloan, said to analysts and investors in a conference call, “The Company’s underlying results were driven by solid loan growth, improved credit quality and continued success in improving efficiency.”
Nevertheless, bank’s net interest margin, which is profit margin between lending and investment- contracted in the fiscal fourth quarter. For the quarter, net interest margin stood at 3.56% compared to 3.89% in the year earlier quarter. In the preceding quarter, net interest margin was 3.66%.
Shares, however edged lower in premarket trading as investors were disappointed with bank’s declining net interest margin.
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