Wells Fargo showed net income up 81% from a year ago at $3.17 billion and net income applicable to the common stock was up 47% to $2.58 billion. This comes to an 8% rise in earnings to $0.57 EPS.
That $0.57 EPS figure is also after $700 million credit reserve build, or $0.10 off earnings, after FDIC special assessment of $565 million, or $0.08 off, and after and merger and restructuring expenses of $244 million, or $0.03 off earnings. Revenue came in at a record as well up 28% to $22.5 billion. The bank said that Wachovia contributed 39% of consolidated revenue and noted that some $206 billion of credit was extended to customers.
Thomson Reuters showed estimates of $0.34 EPS and $20.49 billion in revenues. As with other financial institutions, no guidance was given.
Account balances were up 20% on average on an annualized basis and its net interest margin was 4.30%. The problem is that charge-offs rose to $4.39 billion from $3.26 billion. The tier-1 capital ratio was 9.8% and the tier-1 common equity ratio was 4.49%; the tangible common equity ratio was 5.24%. Wells Fargo does expect credit losses and nonperforming assets to rise. Charge offs came in at 2.11%.
The problem with the supreme headline beat is that close to a billion came from a hedging gain and much was tied to mortgages which many feel won’t be there this quarter. The headline looks great, but the inner workings look soft. Shares are down 6% at $23.55 in pre-market trading. Warren Buffett might be happy, but he still wants another stimulus package.
JON C. OGG
Top Gaining Stocks
Top Losing Stocks