Mortgage banking represented one weak spot in Wells Fargo's third-quarter results and company officials said that would likely be the case in the fourth quarter.
Noninterest income related to home lending was off by $43 million to $1.6 billion year-over-year. Quarterly origination volume fell to $55 billion, down $7 billion from the second quarter, although up 15% from the second quarter 2014's $48 billion.
Its application pipeline was also smaller, meaning origination volume would likely fall further in the fourth quarter, Chief Financial Officer John Shrewsberry said. The company got $73 billion of applications in the quarter, down from $81 billion in the second quarter and $93 billion in the first quarter.
Wells Fargo's third-quarter profit rose just 1% compared with the same period in 2014, to $5.8 billion. The bigger story, however, may be in the underlying numbers and how they are strengthening the $1.75 trillion-asset Wells' prospects down the road.
Those figures included an 8% year-over-year increase in total loans to $903 billion and a 6% jump in deposits to $1.2 trillion, along with solid increases in the number of primary consumer and business checking accounts.
"We're experiencing some of the strongest growth we've seen in years in terms of our basic building blocks: relationships, loans, deposits and the depth of relationships," Chairman and Chief Executive John Stumpf said during a conference call Wednesday. "Not all that shows up next quarter, but over the long term it's the best way we know to successfully grow."
Meanwhile, Wells' credit quality picture sharpened, too.
Nonperforming assets fell to $13.3 billion, down a whopping 17% from the third quarter of 2014. And chargeoffs are moving in the right direction, totaling $703 million for the quarter, or 0.31% of average loans.
"That's substantially lower than any time in recent memory," Shrewsberry said in an interview after the conference call. "Credit performance can't really improve meaningfully from where we are today. … We're not going to zero."
For now, Wells is making the most of the situation. It did not add anything to its loan loss reserve — the first time since 2010 that it made no quarterly provision.