It was another tough quarter for Wells Fargo & Co.’s bread-and-butter product.

Mortgage fees at the nation’s biggest home lender declined by a third in the three months ended June 30 to the lowest in more than five years, while total average loans slipped 1 per cent from a year earlier. Net income missed analysts’ estimates as the bank took a US$481 million tax expense.

Lenders including Wells Fargo are battling for a smaller mortgage pie as rising interest rates make home loans more expensive and nonbank competitors take greater market share. Revenue from mortgage originations and sales dropped 33 percent in the quarter, the San Francisco-based firm said Friday in the statement.

Chief Executive Officer Tim Sloan had warned investors of “overcapacity” in mortgages at an investor conference in May.

In February, the Fed prohibited Wells Fargo from increasing assets until it fixes missteps involving misleading sales practices at its consumer bank. Since then, the nation’s third-largest lender by assets has faced more scrutiny, with the U.S. Department of Justice and Securities and Exchange Commission examining the wealth-management unit, a person familiar with the probes had said.

Wells Fargo shares fell 2.5 percent to $54.65 at 8:12 a.m. in early trading in New York. The stock dropped 7.7 percent this year through Thursday.

JPMorgan Chase & Co. and Citigroup Inc. also reported results Friday, posting profit that beat analysts’ estimates. JPMorgan, the largest U.S. bank, generated better-than-expected loan growth and trading revenue in the quarter, while Citigroup had record fees from its treasury and trade solutions business.

Here’s how Wells Fargo did:

-Net income fell 11 per cent to US$5.2 billion, or 98 cents a share, from US$5.86 billion, or US$1.08, a year earlier. Excluding the tax charge, per share profit was US$1.08, missing the US$1.12 average estimate of 27 analysts surveyed by Bloomberg.

-Non-interest expense increased 3 per cent to US$14 billion as compensation costs climbed. Analysts expected a drop to about US$13.5 billion.

-Net interest margin, the difference between what a bank charges borrowers and pays depositors, increased 9 basis points from the previous three-month period and 3 basis points from a year earlier.

-Efficiency ratio, a measure of profitability, improved to 65 per cent from 69 per cent in the first quarter. Sloan is targeting 55 per cent to 59 per cent in the long term, excluding litigation costs.