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Wells Fargo stock dips as revenue falls short

October 12, 2012: 5:40 PM ET

Click the chart to track shares of Wells Fargo.

Wells Fargo posted a record profit of $4.9 billion for the third quarter as mortgage lending picked up, but weaker-than-expected revenue left investors disappointed.

The nation's largest mortgage lender said it originated $139 billion of mortgages during the third quarter, up 6% from a year earlier, as record low interest rates drove homeowners to refinance. But the  low rates also weighed on the interest income that Wells Fargo earns on its loans and other investments. In fact, the bank's profit margin from lending and investing, a key financial measure for banks, fell to 3.66% from 3.88% a year ago.

Shares of Wells Fargo (WFC) closed down almost 3% on Friday, and the bank's earnings were a hot talking point on Stocktwits. So too was JPMorgan Chase (JPM), which reported a record profit for the third quarter and increased revenue in every business line.

JonathanBragg: Ugly day to be an owner of $WFC, earnings not what I was looking for at all.

andrezdanow$WFC quarter lousy on all fronts: NIM falls, revs miss, net charge-offs rose, non-performing assets rose, $800m gain from reserve release

While both Wells Fargo and JPMorgan both delivered record earnings, one user pointed out that part of the reason is that they've been trimming their reserves. That's especially worrisome, as just earlier this week, the U.S. government sued Wells Fargo over claims that the bank made reckless home mortgage loans for a decade.

retheauditors@SchaeferStreet Record Q's for $WFC $JPM because not reserving enough for litigation, reps/warranties. Will bite 'em eventually.

mytfine: Everyone so excited tripping over themselves claiming how $WFC owns the mortgage/housing market. the 100% assumption is that this is good.

fundymental$WFC so 25% of Q3 rev is from home loans. At market rates more of a burden than a positive. Long term servicing HAS to be net neg.

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Hibah Yousuf
Hibah Yousuf
Reporter, CNNMoney

Hibah Yousuf is a reporter at CNNMoney, where she covers stocks, bonds, commodities and currencies trading across the globe, as well as corporate earnings and other markets-related news. Prior to joining the site in 2009, she interned at Money Magazine.

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