(Reuters) - Wells Fargo & Co , the largest U.S. mortgage lender, reported a drop in quarterly profit for the second time in a row as expenses rose and it set aside more money to cover bad loans.
Low interest rates have prevented Wells Fargo and its regional rivals from capitalizing on their growing deposit base.
Shares of the fourth-largest U.S. bank by assets fell 1 percent in premarket trading on Tuesday.
Wells Fargo set aside $300 million to cover credit losses in the second quarter, up 38.2 percent from a year earlier.
The bank's non-interest expenses rose 2.3 percent to $12.47 billion, accounting for about 58.5 percent of its revenue. Wells Fargo has been targeting expenses of 55-59 percent of revenue.
Mortgage lending revenue, which accounts for 17 percent of the bank's non-interest income, fell 1 percent to $1.71 billion.
Wells Fargo made $62 billion of home loans in the quarter ended June 30, up from $47 billion a year earlier and $49 billion in the first quarter.
The bank said mortgage applications in the pipeline fell to $38 billion as of June 30 from $44 billion at the end of March.
JPMorgan Chase & Co
Net income applicable to Wells Fargo's common shareholders fell to $5.36 billion from $5.42 billion.
However, profit rose slightly on a per-share basis to $1.03 from $1.01 as outstanding diluted shares declined 2 percent after the bank bought back shares.
Analysts on average had expected a profit of $1.03 per share, according to Thomson Reuters I/B/E/S.
Wells Fargo's shares were trading at $56 before the bell. The stock rose about 3.5 percent in the second quarter, while shares of other Wall Street banks gained 7-12 percent in the period.
(Reporting by Neha Dimri and Anil D'Silva in Bengaluru; Editing by Kirti Pandey)
