Wells Fargo & Co., the largest U.S. home lender, posted a 22 percent gain in third-quarter profit as better credit quality eased pressure on the bank’s reserves.

Net income climbed to a record $4.06 billion, or 72 cents a diluted share, from $3.34 billion, or 60 cents, in the same period a year earlier, the San Francisco-based company said today in a statement. The average estimate of 30 analysts surveyed by Bloomberg was for earnings per share of 72 cents.

Chief Executive Officer John Stumpf, 58, has focused on cutting costs as the 9.1 percent U.S. jobless rate and slow economy keep borrowers on the sidelines. Stumpf’s Project Compass aims to reduce expenses by $1.5 billion a quarter by the end of next year. The company was scheduled to complete the integration of Wachovia Corp.’s retail branches this month.

Even though the economy and record-low interest rates are a drag on Wells Fargo, “it still has numerous opportunities to realize revenue synergies with Wachovia in addition to the projected cost savings from Project Compass,” Joe Morford, a San Francisco-based analyst with RBC Capital Markets, wrote in an Oct. 4 note to clients. He rated the stock “outperform.”

Stumpf must contend with Federal Reserve policies aimed at lowering the cost of loans for businesses and consumers. The average rate on a typical 30-year mortgage fell to a record 3.94 percent earlier this month, according to housing-finance firm Freddie Mac.

While the decline may stimulate the economy, it’s squeezing profit margins for banks. Wells Fargo may be able to counter by lowering its cost of deposits, David Hilder, an analyst at Susquehanna Financial Group LLLP, wrote in an Oct. 7 note.

Debit Cards

On top of that, banks need to replace revenue chipped away by new financial rules, including about $8 billion attributed to federal caps on what banks can charge merchants for debit-card transactions.

Wells Fargo has ceased all debit-reward programs and is testing a $3 monthly fee in some markets to replace lost revenue. Bank of America’s plan to charge customers $5 a month sparked objections from critics including President Barack Obama, and five House Democrats asked Attorney General Eric Holder on Oct. 13 to investigate whether banks and their trade groups colluded on decisions to impose new fees.

JPMorgan Chase & Co. (JPM), the second-largest U.S. bank as of midyear, recorded a third-quarter profit last week of $3.1 billion, excluding a $1.9 billion accounting gain, according to a statement from the New York-based company. Citigroup Inc. (C), ranked third and also based in New York, was scheduled to post quarterly results today. Charlotte, North Carolina-based Bank of America Corp. (BAC), which was ranked first, reports tomorrow. Wells Fargo was fourth-largest by assets.

Concern about shrinking revenue and risks tied to the European debt crisis have led some investors to shun banks. The 24-company KBW Bank Index (BKX) fell 27 percent through Oct. 14, with the worst performer, Bank of America, down 54 percent.

Wells Fargo’s decline is among the smallest at 14 percent. The firm’s biggest shareholder is Berkshire Hathaway Inc., the insurer run by billionaire Warren Buffett.