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First-quarter profit for Wells Fargo & Co., the biggest U.S. mortgage lender, surged 14% in the latest quarter as the bank continued to trim its losses on soured loans.

Net income after dividends on preferred stock rose to $5.6 billion in the January-March period from $4.9 billion a year earlier, the bank reported early Friday. On a per-share basis, earnings were $1.05, well above the 97 cents forecast by Wall Street analysts. Revenue in the first quarter fell to $20.6 billion from $21.3 billion a year earlier, in line with analysts’ estimates.

The rise in rates on U.S. mortgages in the latter part of last year continued to have a negative impact on Wells Fargo’s mortgage business.

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The San Francisco-based bank, which is the fourth-largest U.S. bank by assets, controls about a third of the U.S. mortgage market. Much of its lending business has been coming from mortgage refinancing, which was dampened by the spike in interest rates.

Wells Fargo funded $36 billion worth of mortgages in the first quarter, down sharply from $109 billion a year earlier.

At the same time, Wells Fargo slashed its losses on loans in the first quarter by 41%, to $825 million from $1.4 billion.

The bank trimmed expenses by $137 million compared with the fourth quarter to $11.9 billion, with lower costs for outside professional services and equipment offsetting higher employee pay and benefits.

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Wells Fargo’s strong first-quarter results contrasted sharply with those of JPMorgan Chase, the biggest U.S. bank. JPMorgan’s earnings dropped 20% driven by a decline in bond trading and mortgage lending. Wells Fargo and JPMorgan were the first two big banks to report earnings for the latest quarter.

The Federal Reserve last month approved Wells Fargo’s plan to raise its dividend by a nickel to 35 cents per share starting in the second quarter and to boost its planned buybacks of shares. The central bank’s OK was based on results of its so-called “stress tests,” an annual check-up of the nation’s biggest banks to determine if they have large enough capital buffers to keep lending through another financial crisis.

Wells Fargo stock rose $1, or 2%, to $48.72.

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Originally published on Advisor.ca

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