Wells Fargo & Company (NYSE: WFC) said its third quarter earnings grew 21 percent on improving credit quality. Its earnings came in above Street's view.

The San Francisco, California-based financial services firm posted earnings of $3.8 billion or $0.72 per share, up from $3.15 billion or $0.60 per share last year. However, revenue declined 6 percent to $19.63 billion.

Analysts surveyed by Thomson Reuters anticipated Wells Fargo to earn $0.72 per share on revenue of $20.21 billion for the third quarter.

"The economic recovery has been more sluggish and uneven than anyone anticipated," said Chairman and CEO John Stumpf. "We can't change the economic environment, yet we have worked hard to control the variables we can - making our products and services more relevant to individuals and businesses, focusing on the customer, making as many loans as possible and growing new relationships - as well as fostering longtime ones. We see the results of this focus in growing cross-sell, deposits, and loans."

Net interest income declined 5 percent to $10.54 billion, while non-interest income slid 14 percent to $9.09 billion. The bank's provision for credit losses fell 47 percent to $1.81 billion.

"Credit quality continued to improve in the third quarter, our seventh consecutive quarter of declining loan losses and the fourth consecutive quarter of lower non-performing assets," said Mike Loughlin, Chief Risk Officer.

Net charge-offs for the quarter were $2.6 billion, or 1.37 percent (annualized) of average loans, down $227 million from $2.8 billion (1.52 percent) in the last quarter, due to lower losses in nearly all loan categories and delinquency trends were stable.

"While we continued to see positive trends in credit performance, the rate of improvement moderated in some portfolios in the quarter, as one would expect at this point in the credit cycle. Absent significant deterioration in the economy, we continue to expect future reserve releases," said Loughlin.

Average core deposits rose 8 percent to $836.85 billion, while non-performing assets declined to $26.84 billion from $34.4 billion. Average loans were down 1 percent to $754.54 billion.

The bank's tier 1 capital ratio as of September 30, 2011 was 11.28 percent, up from 10.90 percent as of last year.

"We are nearing the completion of our three-year Wachovia integration process. To date, Regional Banking has now completed its store conversions and our retail stores are Wells Fargo coast-to-coast on a single platform," said Stumpf.

Wells Fargo stock closed Monday's regular trading down 8.44 percent at $24.42 on the NYSE, while in the after-hours the stock rose 0.04 percent to $24.43.

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