Wells Fargo's income jumped 51 percent in the first quarter as more people opened accounts with the bank and business customers took out more loans. Higher interest rates resulted in a sharp decline in new mortgages.
The San Francisco bank said Wednesday it earned $3.6 billion after paying preferred dividends, or 67 cents per share. That compared with $2.4 billion, or 45 cents a share in the first quarter of last year. The earnings were a penny better than the forecast of analysts surveyed by FactSet.
Revenue fell to $20.3 billion from $21.5 billion, largely due to lower income from mortgage fees.
Wells Fargo said more of its customers were paying their debts on time as the economy improves. Other major banks that have released results over the past week, including JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp., reported similar trends.
The amount of soured loans that Wells wrote off declined by $629 million from the previous quarter to $3.2 billion. Wells released $1 billion from its reserves for loan losses in the quarter as defaults declined, giving a boost to its bottom line.
A sharp rise in mortgage rates hurt Wells' home loan business. Rates for 30-year mortgages jumped to 4.84 percent in March from 4.35 percent in September. New mortgage loans at Wells fell to $84 billion from $128 billion the previous quarter.
Applications for home mortgages, an indicator of future lending, fell sharply to $102 billion from $158 billion in the prior quarter. The amount of pending applications also fell to $45 billion at the end of the first quarter from $73 billion at the end of December.
Wells Fargo & Co.'s stock fell 3 percent to $29.17 in early trading.
On the positive side, Wells Fargo's customers are saving more. Checking and savings account deposits grew 9 percent from last year to $722.5 billion.
Small business customers also took out loans totaling $3.7 billion, an increase of 27 percent from last year.
"As the economy continued an uneven recovery, our business customers increased borrowing and utilization of credit lines - a hopeful sign that businesses are once again investing for growth," said Wells Fargo CEO John Stumpf in a statement.
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