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Oct. 11 - Wells Fargo Reports Record Q3 Net Income of $5.6 Billion

SAN FRANCISCO – Wells Fargo & Company (NYSE:WFC) reported record net income of $5.6 billion, or $0.99 per diluted common share, for third quarter 2013, up from $4.9 billion, or $0.88 per share, for third quarter 2012, and up from $5.5 billion, or $0.98 per share, for second quarter 2013. For the first nine months of 2013, net income was a record $16.3 billion, or $2.89 per share, compared with $13.8 billion, or $2.45 per share, for the same period in 2012.

“Wells Fargo continued to demonstrate strong and consistent financial performance in the third quarter,” said Chairman and CEO John Stumpf. “As our economy continues to transition to higher interest rates, our diversified business model and strong risk discipline contributed to record earnings per share along with continued strength in return on assets, return on equity and capital. The improvement in the housing market has been beneficial to our customers and significantly contributed to our broad-based credit improvement in the quarter. We also deepened relationships, resulting in increases in cross-sell across the Company. As we look forward, we remain well positioned to meet the needs of our customers and to perform for our shareholders.”

Chief Financial Officer Tim Sloan said, “This was a solid quarter for Wells Fargo. 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. Year-over-year, we had strong loan growth, double-digit increases in noninterest income across many of our businesses and continued to build capital and return more to shareholders through dividends and share buybacks.”

Revenue

Revenue was $20.5 billion, compared with $21.4 billion in second quarter 2013. With net interest income stable, revenue declined primarily from lower mortgage banking revenue and trust and investment fees, partially offset by higher market sensitive revenue5 and other income. Businesses generating year-over-year double-digit revenue growth included credit card, personal credit management, retail sales finance and retirement services.

Net Interest Income

Net interest income remained strong in third quarter 2013 at $10.7 billion, essentially unchanged from second quarter 2013. Net interest income benefitted from available-for-sale (AFS) securities portfolio purchases, which consisted largely of agency mortgage-backed securities (MBS), lower funding costs, organic growth in commercial and consumer loans, commercial real estate loan acquisitions, and one additional business day in the quarter. These benefits were offset by lower interest income from mortgages held for sale and reduced income from variable sources, such as purchased credit-impaired (PCI) loan resolutions and periodic dividends.

The Company’s net interest margin declined 8 basis points from the prior quarter to 3.38 percent. Deposit and long-term debt growth and a decline in mortgages held for sale caused cash and short term investments to increase despite growth in other earning asset categories including loans and AFS securities. Although deposit growth has little impact on net interest income, it is dilutive to net interest margin and customer driven deposit growth accounted for 3 basis points of compression. Liquidity-related issuances in the quarter, both term deposits and long-term debt, diluted the margin by approximately 3 basis points. Separately, the net impact of balance sheet repricing and growth also diluted the net interest margin by 1 basis point, while lower income from variable sources, including PCI loan resolutions and periodic dividends, led to another 1 basis point of compression.

Noninterest Income

Noninterest income was $9.7 billion, compared with $10.6 billion in second quarter 2013, driven primarily by lower mortgage refinance volume and reduced gain on sale margins. Trust and investment fees declined in the quarter due to reduced investment banking revenue and seasonally lower retail brokerage commissions. These declines were partially offset by increases in debt and equity gains, mortgage banking servicing income and trading revenue.

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