US banking giant Wells Fargo Friday reported a 13 percent rise in profits even as the results showed a big drop-off in home mortgages compared with the prior quarter.
Wells Fargo, the nation's largest mortgage originator, said third quarter earnings came in at $5.32 billion on revenues of $20.48 billion.
The results were strengthened by an improvement in credit quality, which enabled a net charge-off of $975 million, down $1.4 billion from the year-ago period.
Overall loans also increased. End-of-quarter loans came in $812.3 billion, up from the $800.2 billion reported last quarter.
But the results also showed how higher interest rates are crimping the bank's important mortgage business.
Wells Fargo, which recently overtook China's Industrial & Commercial Bank of China as the world's largest bank by market capitalization, in August cut 2,300 jobs in the US due to declines in mortgage refinancings in the wake of higher interest rates. Several other banks have also cut mortgage-related staff.
Wells Fargo said home lending originations sank to $80 billion, compared with $112 billion in the prior quarter, while applications fell to $87 billion compared with $146 billion.
"This was a solid quarter for Wells Fargo," said chief financial officer Tim Sloan.
"As expected, mortgage banking revenue was lower in the quarter as the recent increases in interest rates reduced refinance volume, but this impact was partially offset by improved credit and lower expenses."
Wells Fargo declined 1.8 percent in pre-market trading.