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Wells Fargo's Profit Rises for 13th Straight Quarter (Update 1)

Tickers in this article: BRK.B JPM WFC
  • Wells Fargo reports a first-quarter profit of 92 cents a share, beating the consensus estimate of 88 cents, according to data compiled by Bloomberg
  • Excluding special items, net income was $5.2 billion, beating the consensus estimate of $4.75 billion.
  • Net revenue came in at $21.3 billion, slightly below an estimate of $21.5 billion.
  • Mortgage banking earnings of $2.8 billion, down from $3.1 billion in the fourth quarter.
  • Net interest margin fell 8 basis points to 3.48%, missing most estimates.
  • The firm repurchased approximately 17 million shares of common stock in the quarter.

Updated from 8:20 a.m. ET with early market reaction and additional commentary.

NEW YORK ( TheStreet) -- Wells Fargo beat first quarter earnings expectations as the nation's fourth largest bank by asset was able to grow earnings for a thirteenth consecutive quarter .

Consensus was that the lender would see a slight sequential drop-off in earnings for the first time since the worst of the financial crisis, as a 2012 mortgage refinancing boom petered out. Wells Fargo's record earnings surpassed estimates, as the firm saw net charge-offs on loans fall to the lowest level since the second quarter of 2006.

Falling interest margins and declining mortgage banking revenue remain a concern, however. Meanwhile the bank's earnings benefitted from one-off items such as reserve releases.

The San Francisco-based lender reported better than expected earnings of $5.2 billion, on revenue of $21.3 billion, beating adjusted estimates of $4.75 billion and $21.5 billion respectively.

Adjusted first-quarter earnings of 92 cents a share beat the consensus estimate of 88 cents, according to analyst forecasts compiled by Bloomberg.

Shares in Wells Fargo fell less than 21% in Friday trading to $37.21, putting the bank's 12-month stock gains of over 10%, excluding dividends, below gains of just under 14% from on the S&P 500 Index .

"Our company earned $5.2 billion in first quarter 2013, the highest quarterly profit in our history--another milestone demonstrating how Wells Fargo's diversified business model continued to produce outstanding results," said Chief Financial Officer Tim Sloan, in a press release.

In its first-quarter earnings report also released on Friday, JPMorgan reported a record profit of $6.5 billion, increasing 16% from the fourth quarter.

Wells Fargo's first-quarter net interest margin -- the spread between the average yield on loans and investments and the average cost for deposits and borrowings -- fell 8 basis points, missing estimates.

The bank also retained $3.4 billion in mortgage loans, forgoing approximately $112 million in revenue had the bank sold off the loans to investors in the quarter, in a move that stabilizes interest margins.

Marty Mosby, a large cap banking analyst with Guggenheim Securities said in an April interview that net interest margin declines of 3-4 basis points would signal a stabilization for Wells Fargo. Meanwhile, the analyst said an earnings beat would hinge on flat mortgage banking earnings, were the bank to increase loan originations, and end a program to hold them on the balance sheet.