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Should bank investors be worried after Wells Fargo's earnings?

Wells Fargo (WFC) reported its fourth quarter numbers Friday, and while earnings and revenues were higher than expected, the news was not all positive.

Going into this morning's report, analysts had been expecting to see the mega-bank report earnings of $0.89 per share, but actual results came in better than expected $0.91. Revenues for the quarter were $21.95 billion, up 7% from the same period last year and outpacing the $21.3 billion that analysts had been expecting

The strong quarter was fueled by the company's mortgage business, which has been its strongest division despite weak margins.

Wells Fargo's mortgage business has been strong mainly because of its economies of scale. The company originates a lot of mortgages. The recent housing crisis prompted many of the big banks to scale back on their mortgage business, but not Wells Fargo, which controls around 30% of the U.S. mortgage market.

However, it appears as though the mortgage business is starting to slow. The company said it funded $125 billion during the quarter, down from $139 billion during the third quarter. Mortgage applications were down from both the prior and year-ago quarters.

In order to keep the economy growing, the Federal Reserve has been keeping interest rates at historic lows, and as a result big banks are finding it increasingly difficult to profit from mortgages.

The impact that the Federal Reserve's fiscal policy is having on the financial sector was apparent in the company's net interest income, which fell 2%.

From these results we can assume that other banks are going to feel the same sort of pressure. 

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va. His articles typically cover big-picture events and forecasting what impact they will have on the stock market. In addition to writing for Fresh Brewed Media, Michael also wrote for AOL's BloggingStocks for three years, focusing most of his attention on the energy and technology sectors. Follow him on Twitter at @MFatMICenter.

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.