Wells Fargo profit up, but stock falls as revenue slips

Wells Fargo & Co.'s profit jumped 21% as it sorted out bad-loan troubles and cut costs, but Wall Street slammed the San Francisco bank as its third-quarter revenue declined.

Some key measures of profitability also dropped at Wells Fargo amid the weak economy and falling interest rates. The bank's shares plunged $1.88, or 7%, to $24.70 in midday trading, although its stock-market value, at about $130 billion, remained the highest in the industry.

Wells Fargo, the fourth-largest U.S. bank as measured by assets but the largest consumer lender, said Monday it earned $4.06 billion, or 72 cents per share, compared with $3.34 billion, or 60 cents per share, in the third quarter of 2010.

Loans and deposits both rose during the quarter. But revenue fell 6%, from $20.87 billion to  $19.63 billion, as its income from interest, fees and trading declined.

Another megabank, New York's Citigroup Inc., said Monday it earned $3.77 billion, or $1.23 per share, up from $2.17 billion, or 72 cents per share, in last year's third quarter. Citi shares fell 36 cents, or 1.3%, to $28.04 at midday.

Archrival Bank of America Corp., which reports its earnings Tuesday, recently disclosed plans to start charging customers $5 a month for using debit cards, triggering waves of protest from consumers and politicians.

During the Wells Fargo earnings call, analyst Chris Kotowski of Oppenheimer & Co. suggested the $5 fee might become an industry standard. By his calculation, that would largely offset revenue big banks have lost as a result of the Federal Reserve cutting in half the amount they can charge merchants who accept debit cards for payments.

Wells Chief Executive John Stumpf was guarded in commenting on how his bank would proceed on that controversial front, referring to a pilot program, just started in a few states, of a $3 monthly fee for customers who make purchases with debit cards.

But Stumpf said Wells Fargo, while proceeding cautiously on raising fees, needs to be compensated for the cost of providing customers safe and easy access to their deposits, including online and mobile banking as well as debit cards and the biggest national network of more than 6,000 branches.

"Our customers are going to tell us ... how they'll pay for those services," Stumpf said.