Wells Fargo reported record net income of $4.1 billion for third quarter 2011, up 21% from $3.3 billion for third quarter 2010, and up 3% from $3.9 billion for second quarter 2011. Revenue was $19.6 billion, compared with $20.4 billion in second quarter 2011.

“This was a strong quarter for Wells Fargo, with solid growth in loans, deposits, investment securities and capital, along with improved credit quality and lower expenses,” said chief financial officer Tim Sloan. “While our industry continued to face challenges due to economic conditions during this quarter, Wells Fargo’s diversified model was again able to produce solid results for our shareholders.”

Wells Fargo said many portfolios had linked-quarter growth in average loan balances, including asset-backed finance, auto (excluding liquidating), capital finance, commercial banking, commercial real estate, corporate banking, credit card, government and institutional banking, international, mortgage, private student lending and retail sales finance.

“Credit quality continued to improve in the third quarter, our seventh consecutive quarter of declining loan losses and the fourth consecutive quarter of lower nonperforming assets,” said chief risk officer Mike Loughlin.

Third quarter net charge-offs were $2.6 billion, or 1.37% (annualized) of average loans, down $227 million from second quarter net charge-offs of $2.8 billion (1.52%). The decline in net charge-offs was driven by lower losses in nearly all loan categories and delinquency trends were stable. Reflecting the improved overall portfolio performance, the provision for credit losses was $800 million less than net charge-offs, compared with $1.0 billion in prior quarter. “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,” said Loughlin. “Absent significant deterioration in the economy, we continue to expect future reserve releases.”

To view the Wells Fargo Q3 news release, click here.