By Noor Zainab Hussain, Manya Saini and Saeed Azhar

(Reuters) -Wells Fargo's profit beat analysts expectations in the third quarter as it set aside less money than expected to cover potential loan losses and predicted its interest income would stabilize, sending shares up 6% on Friday.

Executives at top lenders have said that U.S. consumer finances remain healthy, underpinned by a solid job market, while activity is rebounding in capital markets.

"The U.S. economy remains strong," CEO Charlie Scharf told analysts. Inflation is slowing and a resilient labor market is supporting consumer spending, Scharf said, strong company balance sheets are fueling consumption and investment.

In the near term, Wells Fargo forecast its net interest income (NII) -- or the difference between what it earns on loans and pays out for deposits -- would drop by 9% in 2024. That was more pessimistic than analyst expectations of an 8.4% decline, after the Federal Reserve cut borrowing costs last month.

Still, Wells Fargo's net interest income could actually benefit from rate cuts because it will pay out less to clients to hang on to their deposits, its Chief Financial Michael Santomassimo told reporters. NII could level out in the fourth quarter and form a trough, he said.

Rates are coming down on certificates of deposit, promotional savings instruments and on most interest-rate sensitive deposits in its commercial banking business, Santomassimo said.

"As we continue to see rate cuts, those trends will continue, and that'll be a net positive for NII as we look forward," he said, because the bank will need to pay less to depositors to hold onto their money.

The fourth-largest U.S. lender reported third-quarter earnings per share of $1.52, compared with expectations of $1.28, according to data from LSEG.

Wells Fargo's NII dropped 11% to $11.69 billion in the quarter.

Analysts on average had predicted $11.87 billion, according to estimates compiled by LSEG.

"We remain bullish on WFC shares," said Raymond James analyst David Long. "Fundamental performance was strong and likely leads to higher earnings per share estimates," he said, citing higher noninterest income and the bank's businesses beating their projections.

Banks' interest income, which had benefited in recent years as the Fed raised interest rates, is expected to keep declining for the rest of 2024.

The U.S. central bank last month lowered its benchmark policy rate for the first time since 2020, cutting it by 50 basis points. Policymakers have projected another half of a percentage point reduction by the end of this year.