Wells Fargo Reports 10th Straight Quarter of Record Income

This morning, Wells Fargo (NYSE: WFC  ) announced its earnings for the third quarter, reporting a net income of $5.6 billion, its highest on record and the 10th straight quarter in a row in which it eclipsed the previous record.

Its net income represented a 13% increase over the third quarter of 2012 and was a 1% gain over the second quarter of this year. However, it did watch its revenue fall from $21.2 billion in the third quarter of 2012 to $20.5 billion in the most recent quarter.

Chairman and CEO John Stumpf noted in the company press release that "Wells Fargo continued to demonstrate strong and consistent financial performance in the third quarter. As our economy continues to transition to higher interest rates, our diversified business model and strong risk discipline contributed to record earnings per share along with continued strength in return on assets, return on equity and capital."

On a per-share basis, earnings were $0.99, beating the $0.97 forecast by Wall Street.

Wells Fargo's return on assets (ROA) stood at 1.53% in the third quarter, which represented a slight drop from the second quarter of 1.55%. However this did represent a 6% improvement over the third quarter last year.

Wells Fargo did see its credit quality improve both quarter over quarter and year over year, as its charge-offs (loans it is unable to collect) fell from 1.21% of total loans in the third quarter of last year to 0.48% in the most recent quarter. Total credit losses stood at $975 million in the third quarter of 2013, compared to $2.4 billion in the third quarter of 2012. Of the improvement, Chief Risk Office Mike Loughlin noted "Credit performance continued to be very strong in the third quarter. Loss levels improved from the second quarter and were at historically low levels."

As it relates to its specific business lines, its Community Bank and Wealth, Brokerage and Retirement businesses saw their income rise 22% and 33% respectively, whereas its Wholesale Banking business saw its income fall by 1% compared to the third quarter of last year.

Its Community Banking business did see a significant decline in revenue, from $13.1 billion to $12.2 billion over the last year, and this was "primarily due to lower mortgage banking revenue," as originations fell from $139 billion to $80 billion. However this was largely the result of a significant decline in refinancings, which stood at $86 billion in the third quarter 2012 compared to $33 billion in the third quarter of 2013.

Wells Fargo is the biggest U.S. mortgage lender.

Finally, Wells Fargo did see its efficiency ratio, which is a measurement of how effectively it uses expenses to generate revenue, a number company's seek to reduce, rise from 58.8% in the third quarter of 2012 to 59.1% in the most recent quarter.

Of the results Chief Finance Officer Tim Sloan added; "This was a solid quarter for Wells Fargo. Year-over-year, we had strong loan growth, double-digit increases in noninterest income across many of our businesses and continued to build capital and return more to shareholders through dividends and share buybacks."

-- Material from The Associated Press was used in this report.

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9/23/2016 4:00 PM
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Wells Fargo CAPS Rating: ****