Wells Fargo reported $4.9 billion in profit for the third quarter. Results of $0.88 a share narrowly beat the estimates of analysts, who forecast earnings of $0.87 a share. The bank’s revenue increased as well, with the company recording $21.2 billion in revenue. This surpassed the $19.6 billion figure from a year earlier.
Wells Fargo continues to churn out record profits. The bank has reported 11 straight quarters of gains in net income. A booming mortgage business led to the 22% jump in earnings. However, the bank’s chief financial officer, Timothy J. Sloan, noted that the strong results were spread across the bank and “it’s more than just the mortgage business.” He continued, “We just have the great benefit of this diversified model.” The wealth management unit improved, along with the sales and trading business.
The bank’s lending division led the growth, snaring $188 billion in home mortgage applications. This was an 11% increase from the third quarter of 2011. Refinancings accounted for 72% of all home loan applications. The bank’s community banking division profits, which includes the retail branches and mortgage business, climbed 18% to $2.7 billion. Total outstanding loans increased slightly, to $783 billion, in the third quarter, while the bank’s home mortgage originations rose 56% to $139 billion.
Broad federal stimulus efforts have propped up the mortgage industry and an initiative by the Treasury Department is increasing refinancings. During the quarter, many consumers refinanced their mortgages to take advantage of record low interest rates. The Treasury program produced 14% of the mortgage volume. In addition, the Federal Reserve has recently introduced a long-term plan to buy large batches of mortgage-backed bonds in an effort to keep rates low.
Wells Fargo is the nation’s largest mortgage lender and now creates roughly a third of all mortgages in the country. However, the mortgage crisis continues to haunt Wells Fargo despite the gains. The bank agreed to pay $175 million this summer to settle accusations from the Justice Department that it discriminated against certain minority homeowners from 2004 to 2009. Wells Fargo was also sued by federal prosecutors who claim the bank defrauded the government and lied about the quality of the mortgages it handled.