Wells Fargo & Co. (NYSE: WFC) has managed to beat earnings but it is obviously going to be in second place after J.P. Morgan Chase & Co. (NYSE: JPM). The bank still shows why it is now the top of the 7 Safest Banks in America as it posted record earnings per share up 38% to of $0.82 EPS. Revenue was $21.3 billion versus $21.6 billion in the prior quarter. Thomson Reuters had estimates of $0.81 EPS and $21.35 billion in revenue.
Wells Fargo showed a return on average assets of 1.41%, up 10 basis points from the prior quarter. Its return on equity rose 72 basis points to 12.86%. Tier 1 common equity under Basel I increased $2.2 billion to $101.7 billion. Its Tier 1 common equity ratio was 10.08% under Basel I; the estimated Tier 1 common equity ratio was 7.78% under the latest Basel III capital proposals.
Share buybacks continue here as the bank repurchased 53 million shares of common stock in the second quarter and an additional estimated 11 million shares through a forward repurchase transaction expected to settle in the third quarter 2012.
Book value per share at the end of the quarter was up to $26.06 per share, up from $25.45 at the end of the first quarter and up from $23.84 a year ago.
If you wonder why this is still the safest bank in America, all you have to do is line up the earnings reports of Wells Fargo and J.P. Morgan and compare the tone. If you forget about how the J.P. Morgan news was not as bad as many investors were braced for, the fact is that Wells Fargo just has far less exposure to losses and derivatives when compared to J.P. Morgan. We would expect the safest bank status to only be even more magnified against the troubled money-center banks of Citigroup, Inc. (NYSE: C) and Bank of America Corporation (NYSE: BAC) when they report earnings next week.
The highly volatile Direxion Daily Financial Bull 3X Shares (NYSEMKT: FAS) is currently up 0.8% at $85.10 in the pre-market trading session. Wells Fargo shares are down marginally on the news by 0.24% at $32.77.
JON C. OGG