Joe Mahoney/The Richmond-Times Dispatch, via Associated PressA Wells Fargo sign in Richmond, Va.

Wells Fargo, the nation’s biggest consumer bank, said profit rose 29 percent in the second quarter from the period a year earlier as loan losses eased significantly.

The bank reported record second-quarter earnings of $3.9 billion, or 70 cents a share, beating the 69-cents-a-share consensus estimate of analysts. That compared with a profit of $3.1 billion, or 55 cents a share, in the period a year earlier.

Wells Fargo’s earnings benefited from the reversal of about $1 billion that the bank had previously set aside to cover loan losses. That helped offset a 5 percent drop in revenue, which fell to $20.4 billion, as new regulations curbed overdraft charges and its big home lending business slowed. New mortgage originations dropped nearly a quarter to $64 billion from $84 billion in the first quarter.

Wells Fargo’s investment bank is far smaller than most of its big rivals, which meant that the difficult market conditions that affected competitors like Citigroup and Bank of America did not hurt as much.

Still, meager loan growth, the rising cost of servicing troubled mortgages and the effect of new financial rules have weighed on its results.

Richard Patterson for The New York TimesJohn Stumpf, chief of Wells Fargo.

“While the economic recovery continues to be slower than expected, there are signs that businesses are investing for growth,” the bank chairman and chief executive, John Stumpf, said in a statement. “Our business fundamentals were strong with increased revenues, loans and deposits, lower operating costs, improved credit quality and higher capital levels.”

San Francisco-based Wells Fargo quietly emerged from the financial crisis as one of the nation’s strongest banks. With its takeover of the Wachovia Corporation in Charlotte, N.C., in the fall of 2008, it established a network of retail branches along both coasts. But its go-slow approach to converting its computer systems and store signage meant that the New York metropolitan area did not change over until this spring, and the integration of its operations in Washington and the Carolinas, the last of its major markets, won’t occur for another few months.

Despite its strong performance over the last few years, many analysts remain cautious. At a time when its rivals are betting on faster-growing areas overseas, some worry about Wells Fargo is too entrenched in the United States, where the housing and job markets remain weak.

Still, the bank’s share price has outpaced the industry, rising about 3 percent over the last year when most bank stocks were down. The stock was up about 42 cents, or 1.6 percent, to around $27 in morning trading. And bank officials suggested the second quarter once again showed the power of its expanded franchise to offset a sluggish domestic economy.

Although total revenues declined from a year ago, several businesses — including corporate banking, commercial real estate, and retirement services — saw double-digit increases from the first three months of the year.

“We are pleased with increased revenue in the quarter, reflecting the stability in loan balances and overall strength of our diversified sources of fee income,” said Tim Sloan, Wells Fargo’s chief financial officer. And unlike competitors like Citigroup, Wells kept its operating expenses in check.

Tuesday’s results showed that Wells Fargo’s operating expenses were $12.5 billion, down $258 million from the first quarter, despite setting aside more money for foreclosure-related matters and litigation. The bank added another $242 million to its reserve to buy back loans from troubled securities that it sold to Fannie Mae, Freddie Mac and other private investors. Over the prior two quarters, it set aside about $713 million.

Wells Fargo, which already had one of the biggest real estate portfolios of any bank, took on with its Wachovia acquisition more than $219 billion worth of commercial real estate and corporate loans, and a big book of risky mortgages. But tighter underwriting standards during the boom, and aggressive management of the problems that followed, have enabled Wells to fare better than many of its peers.

Bank of America announced a $20 billion hit to second-quarter earnings to accelerate the clean-up its mortgage troubles, while Chase has announced a series of multi-billion charges tied to its home lending business to bolster its litigation and loss reserves and improve its loan servicing practices. Citigroup, which has a much smaller business, has set aside about $1 billion to cover loan repurchases and expects only a modest uptick in servicing costs.

Overall, Wells Fargo said that loan losses were easing. As a result, bank officials said they released another $1 billion from loan loss reserves after seeing six straight quarters of improvement. Bank officials expect to keep drawing down reserves in the coming quarters.

“Absent significant deterioration in the economy, we expect future reserve releases,” said Mike Loughlin, the bank’s chief risk officer.

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