Wells Fargo Hit by Credit Woes

The remainder came from seasonally higher losses in its auto portfolio and in unsecured consumer loans, Wells said.

During the third quarter, the bank eliminated its correspondent home loans channel in which the bank would purchase home equity loans originated by other lenders. While the correspondent channel represented about 7% of the total loans in its home equity portfolio, it also contributed to approximately 25% of the losses in the quarter, it said.

"Given the current real estate market conditions, credit losses in the home equity portfolio are likely to increase fourth quarter 2007 and remain at elevated levels into 2008," the company said.

Wells Fargo's results were similar to those at other large banks hit hard by this summer's credit crunch and mortgage downturn.

Citigroup(C Quote) reported on Monday that profits fell 57% in the third quarter.

The New York banking titan reported more than $3 billion of writedowns on leverage loan commitments and mortgages and related securities in its warehouse. Citi's total credit costs jumped by $3 billion, as the bank recognized $780 million in credit losses and took a net charge of $2.24 billion to increase loan-loss reserves.

Citi CFO Gary Crittenden said he expected the U.S. credit environment to continue to deteriorate in the fourth quarter.