FILE - In this Jan. 18, 2011 file photo, a customer exits a Wells Fargo bank branch in Los Angeles. Wells Fargo & Co. said Monday, Oct. 17, 2011, its third-quarter profit jumped 21 percent, as write offs of bad loans dropped while deposits grew.(AP Photo/Reed Saxon, file)
FILE - In this Jan. 18, 2011 file photo, a customer exits a Wells Fargo bank branch in Los Angeles. Wells Fargo & Co. said Monday, Oct. 17, 2011, its third-quarter profit jumped 21 percent, as write offs of bad loans dropped while deposits grew.(AP Photo/Reed Saxon, file)
NEW YORK (AP) ? Wells Fargo & Co.'s CEO John Stumpf says he understands the "angst and anger" being expressed by the protesters at Occupy Wall Street and its spin-off sites around the country.
"This downturn has been too long. Unemployment is too high. And people are hurting. We get that," he said on Monday in response to a question on the demonstrations. Stumpf was speaking on a conference call to discuss third-quarter results for the nation's fourth-largest bank by assets and its largest mortgage lender.
Weak economic conditions worked against Wells Fargo during the quarter ended Sept. 30. The San Francisco bank's income jumped 21 percent, but that was driven largely by fewer problem loans. That allowed the bank to reduce the amount of money set aside to cover defaults. Accounting rules require banks to count those funds as income.
Ultra-low interest rates also hurt the bank's results by reducing the income it gets from lending. As a result the bank reported revenue that was lower than Wall Street expected. The stock fell 8 percent to $24.54 as of 2:45 p.m. Eastern.
Stumpf became the second leader of a major U.S. bank to address the growing protest movement, which reached its first month Monday and has spread to other U.S. cities and abroad. Last week Vikram Pandit, CEO of Citigroup Inc., also expressed sympathy with demonstrators and said he'd be willing to meet with them.
The best way to respond to the protests, Stumpf said, is to work to improve the economy. "We're committed to lead more, hire more, lend more, be part of the solution."
Wells Fargo's net income rose to $4.06 billion, or 72 cents per share, matching the forecasts of analysts surveyed by FactSet. In the same period a year ago the bank earned $3.34 billion, or 60 cents per share.
Revenue fell 4 percent to $19.63 billion, below the $20.24 billion analysts expected. Revenue in the year-ago period was $20.39 billion.
The revenue decrease reflected two issues of concern throughout the banking industry: low interest rates and a host of new regulations.
Net interest income, or the money earned from across deposits and loans, fell 5 percent to $10.54 billion.
Investors are concerned about how much of a hit Wells will take in the future as super-low interest rates persist. Unlike other large banks such as JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp., Wells Fargo doesn't have a big investment bank and relies heavily on traditional lending businesses, which are closely tied to interest rates, to make money.
"It's not only a concern about the quarter, but for the future," Keefe, Bruyette & Woods analyst Fred Cannon said. "The thing that the company does best is gather deposits, and that isn't worth much when interest rates are this low."
Average deposits rose 8 percent to $836.8 billion during the quarter.
Wells Fargo's fee income also took a hit, largely from new regulations that limit overdraft fees and make it harder to raise interest rates on credit cards. Service charges on Wells Fargo's deposit accounts fell 3 percent to $1.1 billion in the quarter.
Overall noninterest income, or money earned from fees and charges, dropped 7 percent to $9.09 billion. Mortgage banking fees plunged 27 percent to $1.83 billion as the housing market continues to languish.
"We thought strong mortgage banking would offset other parts of the balance sheets," said analyst Paul Miller of FBR Capital Markets. "Mortgage banking came in a lot lower than we expected."
The combination of low interest rates and more regulations is making it more difficult for banks to make profits, Miller said. "It's a tough, tough environment in which to run a bank."
On the bright side, Wells reported that borrowers weren't falling behind as much on paying their debts. That allowed the bank to reduce the amount it set aside to cover uncollected loans during the quarter and release $800 million from its reserves, which boosted income.
Net loan charge-offs ? the amount of loans written off as uncollectible ? fell 8 percent to $2.61 billion.
It was the seventh straight quarter that charge-offs declined, Chief Financial Officer Timothy Sloan said during the call. But those gains are slowing down. "While we continue to see positive trends in credit performance, the rate of improvement moderated in some portfolios," he said. The bank expects to be able to release more from its reserves in the future unless the there is "significant deterioration in the economy," Sloan said.
Wells Fargo has also been cutting costs. Expenses for the quarter fell 5 percent, including a 27 percent drop in employee benefit costs.
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