Wells Fargo reported a 13 per cent rise in net income to a record $4.3bn in the first quarter on the back of a strong performance in mortgages.

The largest US home lender recorded earnings of 75 cents a share, up from 67 cents a share, or $3.8bn, in the same period a year ago, beating Wall Street forecasts of 73 cents a share. But expenses increased to $13bn and Wells said it would not succeed in cutting them below $11.25bn by the end of the year, leaving them at a higher level than analysts had hoped.

Revenue grew 6 per cent to $21.6bn, up from $20.3bn, as mortgage banking income rose 42 per cent to $2.9bn. The bank lowered its loan-loss provision to $2bn from $2.2bn, while charge-offs fell to 1.3 per cent of average total loans from 1.7 per cent.

“Quarterly revenue was the highest in nine quarters, and we achieved our ninth consecutive quarter of earnings per share growth,” said John Stumpf, chief executive. “Our continued performance for shareholders through a variety of economic environments is a testament to our diversified business model.”

The lender’s strong performance since the financial crisis has been driven by its powerful position in the mortgage market and its capital strength has also boosted its stock, making it the most valuable US bank by market capitalisation. Unlike many of its peers, Wells has less exposure to investment banking and has been less troubled by stock market volatility and trading performance.

The bank has used its position to make several acquisitions from troubled European banks, including BNP Paribas’ North American energy business and Bank of Ireland’s asset-based lending business Burdale. It is also planning to expand its corporate banking operations in 20 global markets.

Wells Fargo graphic

The US remains its biggest market by far and total lending fell 4 per cent from the end of the fourth quarter to $766.5bn, as “loan growth was softer than anticipated”, said Barclays analyst Jason Goldberg.

The profitability of the bank’s loans, as measured by its net interest margin – the spread between the interest a bank pays to borrow and the interest it earns loaning money out – edged down to 3.91 per cent from 4.05 per cent in the first quarter of last year.

Expenses rose to $13bn from $12.5bn a year ago, reflecting higher benefits and pay and $314m in legal reserves.

The bank said expenses were unlikely to drop significantly because higher-than-expected revenues from mortgage banking and acquisitions meant costs would rise too.

Shares in Wells, which have outperformed peers in the past 12 months, fell 3.5 per cent to $32.84.

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