Wells Fargo, the fifth-largest US bank and the second largest mortgage lender, today reported a fall in income in the second quarter but the result was better than expected, giving a much-needed boost to the flagging US share market.

Net income at the San Francisco-based bank fell to $1.75 billion, or 53 cents per share, from $2.28 billion a year ago. Revenue increased 16 per cent to $11.5 billion. Analysts had expected profit of 49 cents per share on revenue of $10.7 billion.

“We’re still affected by the weak economy, but we believe we’re one of the best positioned in financial services to grow through this adversity,” Wells Fargo chief executive John Stumpf said.

Shares of Wells Fargo jumped 16 per cent to $23.80, helping Wall Street to open flat after futures trading had earlier indicated the Dow Jones would open in negative territory.

Wells Fargo has fallen 32.1 per cent this year amid sub-prime turmoil and the credit crunch. The bank has remained more resilient than the wider US banking sector, which has fallen more than 45 per cent on average. It was forced to write off $490 million of bad mortgages in the third quarter of 2007.

Mr Stumpf has more than quadrupled the amount set aside for credit losses to $3.01 billion from $720 million a year earlier, and net loan charges more than doubled to $1.51 billion. Despite the adverse trading conditions the company increased its quarterly dividend to 34 cents per share from 31 cents.

Gains in credit card fees and insurance revenue softened the impact of bad home loans, shielding Wells Fargo from the losses incurred by rivals Citigroup and Washington Mutual this year. Its home state of California ranked second among US states in June for foreclosures, with one filing for every 192 households.

Chief financial officer Howard Atkins said the US housing market had not bottomed and would remain soft but some markets had begun to improve. Wells Fargo has added market share in retail mortgages, middle-market commercial lending and asset management.

Billionaire Warren Buffett’s Berkshire Hathaway is Wells Fargo’s biggest investor, owning more than eight per cent of its stock. The so-called Sage of Omaha boosted his stake in Wells Fargo in the first quarter by 1.4 million shares to 290.7 million.

Wells Fargo has $595 billion in assets and 160,900 employees across more than 80 businesses.

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