Wells Fargo profit jumps 24 percent to record high

SAN FRANCISCO, Fri Jan 11, 2013 — Wells Fargo & Co. on Friday said fourth-quarter profit rose 24 percent to a record high as the bank set aside less money to cover bad loans and made more fees from mortgages.

But the bank’s net interest margin declined and it made fewer mortgage loans than in the third quarter, and its shares fell 1.4 percent to $34.92 in premarket trading.

Wells Fargo, the fourth-biggest U.S. bank and the largest U.S. home lender, said fees from mortgages climbed nearly 30 percent from a year ago to $3.1 billion as homeowners continued to refinance their homes at low rates. The bank issued $125 billion in mortgages during the quarter, down from $139 billion in the third quarter.

In a sign that the mortgage refinancing boom could be slowing, the bank’s pipeline of unclosed home loans was $81 billion at the end of the fourth quarter, down from $97 billion at the end of the third quarter.

The bank’s net interest margin — a closely watched measure of how much money banks make from their loans — fell to 3.56 percent from 3.66 percent a year ago, but the decline was less severe than in the third quarter. Banks are seeing their margins shrink as older loans with higher interest rates are paid down.

Wells Fargo’s provision for loan losses fell to $1.8 billion from about $2 billion a year ago as borrowers continued to do a better job of making their payments.