Wells Fargo & Co (WFC.N), the No. 1 U.S. bank by market value, reported a 3.5 percent fall in quarterly profit on Friday as it set aside more money to cover potential loan losses.
The bank, which is also the biggest U.S. mortgage lender and a major lender to the energy sector, said its net income applicable to common shareholders fell to $5.17 billion in the second quarter ended June 30, from $5.36 billion a year earlier.
Earnings per share slipped to $1.01 from $1.03, matching the average analyst forecast, according to Thomson Reuters I/B/E/S, as provisions for loan losses rose to $1.07 billion from $300 million. Total revenue rose 4 percent to $22.16 billion.
The bank's home loan originations rose to $63 billion in the period, up 2 percent from a year earlier and 43 percent from the first three months of the year. Total loans increased 1.05 percent to $957.2 billion from the previous quarter.
However, the San Francisco-based bank said mortgage banking revenue fell 17 percent to $1.41 billion, mainly due to a decline in servicing revenue resulting in part from lower mortgage servicing rights hedging results.
Mortgage banking revenue of $1.4 billion compared to an estimate of $1.6 billion by Credit Suisse analyst Susan Roth Katzke.
Unlike some other big banks, Wells Fargo may not see some of the benefit from second-quarter low interest rates in its mortgage operations until the third quarter, because of differences in accounting, KBW analyst Brian Kleinhanzl told reporters ahead of Friday’s earnings.
Income from community banking, Well Fargo's biggest business, which includes regional banking and consumer and mortgage lending, fell 1 percent to $3.18 billion.
Wells Fargo's shares were down 1.1 percent at $48.38 in premarket trading. Up to Thursday's close, the bank's stock had dropped about 10 percent since the start of the year.
(Reporting by Nikhil Subba in Bengaluru; Editing by Ted Kerr)