Oct 13 (Reuters) - Wells Fargo posted an increase in third-quarter profit on Tuesday, helped by growth in its loan book and higher interest income.
The fourth-largest US lender reported net income of $5.95 billion, or $1.87 per share, for the three months ended September 30, compared with $5.59 billion, or $1.66 per share, in the year-ago period.
Wells Fargo's net interest income - the difference between what a lender earns on loans and pays out on deposits - rose 5% to $12.52 billion in the quarter.
Th bank has been able to deploy more of its balance sheet since the Federal Reserve removed a years-long regulatory cap on its assets, giving it greater room to compete for loans.
Wells has leaned on credit cards and auto loans to grow its consumer loan book, tapping into healthy spending trends.
The economy has remained on a firm footing due to heavy AI-led business investments, resilient consumer spending and relative stability in the labor market.
US banks have also benefited from the reinvestment of matured assets into higher-yielding vehicles, boosting overall margins.
Chief Financial Officer Mike Santomassimo last month struck an upbeat tone on the bank's loan growth forecast for the year, signaling credit and spending trends remained healthy despite concerns that higher costs could squeeze household budgets.
Despite expectations for strong earnings, banking stocks have sold off recently as investors turn cautious on the prospect of continued interest rate hikes by the Federal Reserve dampening economic activity. The KBW Bank Index has shed more than 12% from its August highs.
Although analysts expect elevated bond yields to support Wells' net interest income in the near term, rising funding costs could temper economic growth.
(Reporting by Utkarsh Shetti in Bengaluru; Editing by Sriraj Kalluvila)
