(by Roy Deng)

Wachovia , the No. 5 U.S. bank, reported today its third-quarter profit rose 14%, on a decline in bad loans. Net income rose to $1.26 billion, or 96 cents a share, up from $1.11 billion, or 83 cents a share in the same period a year ago. Excluding non-recurring items, earnings were $1 a share, from 88 cents from a year earlier. Analysts, compiled by Thomson First Call, were expecting 99 cents.

Retail banking profit rose 15% to $770 million, corporate and investment banking profit rose 40% to $435 million and capital management profit fell 17% to $108 million.

Sales rose to $5.62 billion from $5.33 billion, vs. analyst forecasts of $5.57 billion. Net interest margin fell 0.21% to 3.36%.

The bank set aside $63 million for bad loans, down 47%, net charge-offs fell 51% to $65 million.