were down 3% to close at $34.25, after the company reported
of $4.94 billion, or 88 cents a share, beating the consensus estimate by a penny, on continued strong mortgage loan revenue.
Total revenue for the third quarter was $21.2 billion, also slightly ahead of the consensus estimate.
Investors may have been disappointed that Wells Fargo's net interest margin narrowed even further than they may have expected after CFO Tim Sloan said at a conference last month that the margin for the third quarter "could be similar to what we experienced in the third quarter of last year when our net interest margin was down 17 basis points."
Wells Fargo's third-quarter net interest margin was 3.66%, narrowing by 25 basis points from 3.91% the previous quarter, and 3.84%, a year earlier.
During the company's conference call with analysts, Sloan said that the company's "operating losses were down $243 million on lower litigation accruals," and that "our litigation reserves consider all litigation matters we are aware of including the recently announced
Expense reduction is a continuing theme for Wells Fargo, and the company's efficiency ratio -- essentially, the number of pennies of overhead expenses for each dollar of revenue -- improved to 57.1 during the third quarter, from 58.2 in the second quarter, and 59.5, during the third quarter of 2011.
The company's second-quarter return on average assets was a strong 1.45% and its return on equity was 13.38%, both increasing slightly from the previous quarter.
Jefferies analyst Ken Usdin said that Wells Fargo's "expenses looked fine, declining $285mm Q-Q," with the efficiency ratio "right in the middle of the company's longer-term target of 55%-59%."
Usdin said that "greater-than-expected [net interest margin] decline is a result of strong deposit growth and a relatively conservative reinvestment strategy (average short-term investments up about $20B)," and that "given the magnitude of NIM compression, net interest income declined just under $400mm ($10,820mm vs. $11,213mm in 2Q)."
Usdin rates Wells Fargo a "Buy," with a price target of $39.00.