NEW YORK (AFP) – U.S. banking giant Wells Fargo Friday reported a 19.4 percent increase in quarterly profits, boosted by better credit quality in the improving housing market and higher overall loans.
Wells Fargo, the nation’s largest mortgage originator, said earnings for the second quarter came in at $5.5 billion compared with $4.6 billion a year earlier.
Revenues inched higher to $21.4 billion from $21.3 billion.
A key factor in the improved performance was better credit quality, with loan losses falling to $1.2 billion in the period from $2.2 billion a year ago.
“The consumer loss levels have improved rapidly due primarily to the positive momentum in the residential real estate market, with home prices improving faster and in more markets than expected,” said chief risk officer Mike Loughlin.
The better conditions permitted Wells Fargo to write back to profits $500 million from earlier loss allowances.
The results also showed a 3.5 percent jump in year-over-year total loans to $802 billion. Commercial loans rose $1.8 billion while consumer loans gained $250 million.
Analysts have been eying Wells Fargo earnings to see how the bank’s critical mortgage business would fair amid rising interest rates. While the performance was weak compared with the second quarter of 2012, the data improved on the first quarter of this year.
Compared with the year-ago quarter, income from mortgage banking fell 3 percent to $2.8 billion and mortgage applications fell 29.8 percent to $146 billion.
But mortgage applications grew 4.2 percent compared with the first quarter of 2013 and mortgage originations rose 2.8 percent. Income from mortgage banking was about flat compared with the first quarter.
Wells Fargo shares gained 1.7 percent at $42.56 in opening trade.
Photo Credit: AFP/Justin Sullivan