Wells Fargo Results Weakened by Slower Mortgage Business

The bank’s CEO said:

Quarterly earnings and EPS increased at double-digit rates compared with first quarter 2012, while loans and deposits demonstrated continued growth in a challenging economic environment. In addition, expenses continued to decline as we improved efficiency across the franchise, and returns on assets and equity increased and remained among the highest in our industry. Capital levels remained strong and we were very pleased to increase our dividend to $0.25 per common share in first quarter 2013 and to receive a non-objection to our 2013 Capital Plan which will allow us to return even more capital to shareholders in the year ahead.

Wells Fargo offered no guidance in its announcement, but the consensus estimates for the second quarter of 2013 call for EPS of $0.92 on revenues of $21.38 billion. For the full year, the EPS estimate is $3.65 on revenues of $85.6 billion.

In its mortgage banking business, Wells Fargo reported non-interest income fell 2.6% year-over-year, home lending originations were down nearly 13%, and applications fell nearly 8%. Net interest margin is also down year-over-year and sequentially.

Wells Fargo has received the go-ahead to raise its dividend from $0.25 to $0.30, following the recent stress test, and the bank’s plan also included an increase in its stock buyback program. The firm’s Basel I Tier 1 common equity ratio is 10.38%, up from 10.12% in the fourth quarter of 2012 and 9.98% in the first quarter of last year.

The company’s shares are down about 1.9% in premarket trading this morning, at $36.81 in a 52-week range of $29.80 to $38.20. Thomson Reuters had a consensus analyst price target of around $39.70 before today’s report.