Impacted by lower mortgage banking revenues, Wells Fargo WFC recorded a negative earnings surprise of 3.4% in third-quarter 2018. Earnings of $1.13 per share missed the Zacks Consensus Estimate of $1.17. However, the bottom-line compared favorably with 83 cents recorded in the prior-year quarter.

Including non-recurring items, net income for the quarter came in at $6 billion compared with $4.5 billion reported a year ago.

Lower provisions and higher net interest income aided results. Moreover, expenses declined. However, reduced fee income was an undermining factor. Further, reduction in loans and deposits acted as headwinds in the quarter.

The quarter’s total revenues came in at $21.9 billion, in line with the Zacks Consensus Estimate. Also, the reported figure compared favorably with the prior-year quarter tally of $21.8 billion.

On a year-over-year basis, quarterly revenue generation at the business segments disappointed. The Community Banking segment’s total quarterly revenues increased 2.6%, Wholesale Banking revenues were down 2.7% and revenues in the Wealth and Investment Management unit dipped nearly 1%.

Loans & Non-Interest Income Fall, Costs Decline, NII Improves

Wells Fargo’s net interest income (NII) in the third quarter came in at $12.6 billion, up 1% year over year. Increased interest income from debt securities, mortgages held for sale, loans, equity securities, along with higher other interest income, were mostly offset by higher interest expense. Further, net interest margin expanded 8 basis points year over year to 2.94%.

Non-interest income at Wells Fargo came in at $9.4 billion, down marginally year over year, primarily due to fall in almost all components of income, including mortgage banking and insurance income. This was partly offset by net gains from trading activities and equity securities.

As of Sep 30, 2018, total loans were $942.3 billion, down around 1% year over year. This was contributed by reduction in consumer loans, partly offset by higher commercial loans. Total deposits came in at $1.3 trillion, down 3.1% from the prior-year quarter.