Wells Fargo posted record earnings in the third quarter as the bank increased mortgage lending and pocketed more fees.
Wells, the nation's biggest mortgage lender, expanded its loan portfolio by making new loans to consumers. It collected more interest on loans than in the same period a year earlier.
Revenue was lower than analysts were expecting, however, and Wells' stock fell 3 percent.
Wells' booming mortgage business accounted for much of its strength in the quarter. Fees from the bank's booming mortgage business added to its revenue. New mortgage loans originations rose to $139 billion from $89 billion in last year's third quarter.
"Real estate is getting better," Wells Fargo chairman, CEO John Stumpf said on a call with analysts. "We saw it in housing, and every quarter we have more confidence."
Wells' net income in the quarter ended Sept. 30 rose 23 percent, to $4.72 billion from $3.84 billion in the same period last year.
That amounts to 88 cents per share, a penny higher than the average estimate of analysts surveyed by FactSet. Wells earned 72 cents per share in last year's third quarter.
Overall revenue rose 8 percent to $21.21 billion, slightly lower than analysts expected. Wells' stock fell $1.07, or 3 percent, to $34.11.
Net interest income, which includes interest on loans, edged up 1 percent to $10.66 billion from $10.54 billion.
Non-interest income, which includes fees, insurance and mortgage banking revenue, rose 16 percent. Card fees rose modestly, while mortgage banking accounted for the bulk of the increase.
That category also includes trading gains, another bright spot for Wells this quarter. Wells reported net gains from trading of $529 million, compared with a loss of $442 million a year earlier. Wells' trading business is smaller than those of its big competitors on Wall Street.
The stock fell mainly because analysts are concerned about Wells' ability make money on interest from loans that it originates. In a call with executives, most analysts focused on Wells' shrinking net interest margin — the difference between interest it collects on loans and interest it must pay to depositors and other lenders. Wells' net interest margin fell to 3.66 percent from 3.84 percent a year earlier.