Wells Fargo on Friday posted record profit in its fourth quarter, but the bank's shares tumbled because Wells said it originated fewer loans in the October-December period and suffered contraction in its interest margins.
San Francisco-based Wells earned $5.09 billion, up 24 percent from the year-ago quarter. Revenue totaled $21.9 billion, a 7 percent increase. The profit was a record for a full year and for a quarter.
"These strong quarterly results are just part of an outstanding year of achievement for Wells Fargo," John Stumpf, the bank's chief executive, said during a conference call with analysts.
For all of 2012, Wells Fargo earned $18.9 billion, up 19 percent from 2011. Revenue totaled $86.1 billion, up 6.4 percent from the year before.
"The housing market began a steady rebound during 2012," Stumpf said. However, he added, "Many measures of activity and prices remained low by historical standards and a complete recovery will still take some time."
Wells Fargo dominates the housing market as a lender, which is why residential real estate is vital to the bank -- and why its fortunes mirror the realty sector.
"There is no doubt that a corner was turned, which is a real positive for our economy and for Wells Fargo," Stumpf said.
Over the first nine months of 2012, Wells Fargo accounted for 30 percent of all new and refinanced mortgages, capturing a larger market share of the mortgage
Still, Wells Fargo's shares fell 0.8 percent Friday, closing at $35.10.
Investors apparently were spooked by two disclosures in the quarterly report. Wells Fargo's originations for home loans faltered, and the bank said its net interest margins contracted.
Originations for home loans totaled $125 billion, down 10 percent from a year ago. Applications for home loans fell 19 percent, Wells said.
Michael Yoshikami, president of Walnut Creek-based Destination Wealth Management, said Wells turned in a "great quarterly report, even though the stock was down. Wells Fargo is a best-of-breed lender."
Despite the flattening of mortgage originations and the difficulties with the shrinking margins, Wells Fargo still remains one of the nation's two most elite banks, along with Chase, according to Ken Thomas, a Miami-based banking analyst and economist.
"I wouldn't bet against Wells Fargo," Thomas said. "As the economy recovers, housing will recover further. And as real estate gets stronger, Wells Fargo will achieve an even stronger position."
Contact George Avalos at 408-373-3556 or 925-977-8477. Follow him at Twitter.com/george_avalos.