Wells Fargo’s profit down 38%

Wells Fargo & Co. ended 2007 with its smallest quarterly profit in six years, dragged down by declining home values and the mortgage mess that’s tormenting most of the banking industry.

The San Francisco-based company said Wednesday that it earned $1.36 billion, or 41 cents a share, in the final three months of the year. That was 38% below the net income of $2.18 billion, or 64 cents a share, it recorded at the same time in 2006. Revenue in the recent quarter was more impressive, rising 8% to $10.21 billion from $9.41 billion a year earlier.

Investors seemed relieved that the report contained no warnings about loan problems that Wells Fargo hadn’t already disclosed. Wells shares rose 88 cents, or 3.3%, to $27.37.

Like its peers, Wells is having trouble being repaid by borrowers saddled with mortgage loans they no longer can afford or are choosing to walk away from as home values plunge below the amount owed.

But so far the company has been able to avoid the monumental troubles that led several banks to post their worst losses in decades and replace their chief executives.