Wells Fargo reports huge drop in mortgage business

Wells Fargo said its mortgage business slumped but first-quarter profit rose 9 percent from the year-ago period, topping $2 billion for the first time in any quarter, as deposits rose and loan loss provisions fell.

In its earnings report for the first quarter of 2006, the San Francisco-based bank said net income jumped to $2.02 billion, or $1.19 a share, from $1.86 billion, or $1.08 a share.

Wells Fargo, one of the nation's largest mortgage lenders, felt the impact of the slowdown in the housing market in the quarter. The bank said home mortgage revenue declined 43 percent, from $1.5 billion in the first quarter of 2005 to $853 million in the first quarter of this year.

Mortgage applications have been declining recently as interest rates move up and signs point to cooling in the U.S. housing market.

The company's stock was trading at $64.35 a share at 11:30 a.m. Eastern time today, down 11 cents a share or 17 percent.

The bank's results for the first quarter of this year include a charge of $52 million, or 2 cents a share, for a change in accounting for stock options paid to employees.

Wells said it took a charge of $184 million for a change in valuation of mortgage servicing rights, and it took a $127 million pretax gain from the sale of some Puerto Rico operations.

Wells said its total interest income in the first quarter rose to $7.53 billion from $5.87 billion a year ago, while total interest expense climbed to $2.66 billion from $1.42 billion. As a result, its net interest income rose to $4.87 billion, from $4.45 billion a year earlier.

"First-quarter credit results were strong and continued to show excellent performance across all our loan portfolios," the bank said in a press release Tuesday.

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