(By Balachander) Wells Fargo & Co (NYSE:WFC) reported lower-than-expected quarterly revenue, and the company's shares dropped 2.53 percent in premarket trading on Friday.
Earnings per share (EPS) increased 22 percent to 88 cents, topping market expectations by a penny. Net income grew 21.7 percent to $4.94 billion for the third quarter. On a sequential basis, earnings rose 7 percent.
Revenue was $21.21 billion, up 8.0 percent from the same period of last year but fell 0.4 percent from the prior quarter. Wall Street analysts, on average, expected a revenue increase of 9.40 percent.
Provision for credit losses declined 12 percent to $1.59 billion.
"In the third quarter, core loans grew by $11.9 billion and we saw continued strength in our mortgage and deposit businesses," commented Chairman and CEO John Stumpf.
Net interest margin was 3.66 percent, down from 3.84 percent in the year-ago period. In the second quarter, net interest margin was 3.91 percent.
Wells Fargo mentioned at a recent investment bank conference that the NIM was likely to be weaker this quarter, but deposit growth will help offset some of that and mortgage banking revenue has been very strong and is likely to continue to be so for the back half of the year.
"With WFC, the risk to the downside is always on the expense side, and the company has had to pull back on some of the earlier promises made to get its quarterly expenses in the $11B range. While we are modeling $11.8B for this quarter and $11.5B for next, we realize that is nudging up against the guidance and that if Wells misses, it is the likeliest to be there," Oppenheimer analyst Chris Kotowski wrote in a note ahead of WFC's results.
As at Sept. 30, total loans were $782.6 billion, compared with $775.2 billion at June 30, 2012.
Meanwhile, JPMorgan Chase & Co. (NYSE:JPM) posted a jump in quarterly earnings and revenue topped market expectations. Earnings per share jumped 37.3 percent to $1.40 from $1.02 and net income rose 33 percent. Quarterly earnings included items: pretax benefit totaling 28 cents, charge-offs of 13 cents and 11 cents related to pretax expense.
In the preceding second quarter, Wells Fargo's earnings rose 18 percent, driven by higher mortgage banking revenue and improved credit quality. Net income was $4.40 billion or 82 cents per share, up from $3.73 billion or 70 cents per share in the year-ago period. Total quarterly revenue grew 4 percent to $21.29 billion.
Wells Fargo shares, which have been trading between $23.19 and $36.60 over the past year, closed Thursday's regular trading at $35.18.