Wells Fargo Sets Record Company Earnings, but Small Drop in Book Value

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Wells Fargo & Company (NYSE: WFC) has released its second-quarter earnings report and the market likes what it sees so far. Earnings rose almost 20% with a record net income of $5.5 billion, or $0.98 in earnings per share. Revenues were up marginally to $21.4 billion. The consensus estimates from Thomson Reuters were $0.93 per share and $21.2 billion in sales.

While rival J.P. Morgan Chase & Co. (NYSE: JPM) posted a stronger earnings growth, Wells Fargo shares closed at $41.89 on Thursday and are trading up more than its rival bank after the report with gains of 1.6% to $42.57. This remains our safest bank of 2013 for depositors, but we would still caution that this was up almost 25% so far in 2013 and shares were up about 34% from its 52-week lows.

Here were some additional key metrics that shareholders (and depositors) will care about:

  • Return on average assets (ROA) rose 14 basis points to 1.55%
  • Return on equity (ROE) rose 116 basis points to 14.02%
  • Total average loans of rose $32 billion to $800.2 billion
  • Total average core deposits were up $55 billion to $936.1 billion
  • Net charge-off rate was the lowest since 2006 at 0.58% annualized)
  • Tier 1 common equity under Basel I increased $15.9 billion to $117.6 billion
  • Tier 1 common equity ratio of 10.73% under Basel I
  • Estimated Tier 1 common equity ratio of 8.54% under Basel III capital rules

One thing we would point out here is that Wells Fargo saw its book value per share actually decline by one cent in the second quarter to $28.26 per share, versus $28.27 per share in the first quarter of 2013.