Wells Fargo expects record Q1 earnings

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cat233's picture
cat233
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Wells Fargo expects record Q1 earnings

From Briefing.com... I am not sure what to say about this except I don't see how.

Cat

Wells Fargo expects record Q1 earnings of approximately $3 bln; sees EPS of
$0.55 vs $0.23 First Call consensus
(14.89 ) -Update-
  Co expects record Q1 earnings of approximately $3 bln; sees EPS
of $0.55 vs $0.23 First Call consensus, revs of $20.0 bln vs $18.98 bln First
Call consensus. Co cites strong operating results at legacy Wachovia; solid
operating margins
with consolidated net interest margin of approximately
4.1% and efficiency ratio of approximately 56%. "Business momentum in the
quarter reflected strength in our traditional banking businesses, strong capital
markets activities, and exceptionally strong mortgage banking results --
$100 bln in mortgage originations, with a 41% increase in the unclosed
application pipeline to $100 biln at quarter end, an indication of strong second
quarter mortgage originations." Tangible common equity (TCE) ratio expected to
increase in first quarter. Tangible common equity is expected to be above
3.1% of tangible assets
at March 31, 2009. The 85% reduction in the
Company's common stock dividend from $0.34 per share to $0.05 per share
announced on March 6, 2009, will benefit retained earnings by about $1.25 bln in
additional common equity per quarter, the equivalent of about 10 basis points of
TCE per quarter, beginning in the second quarter.
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Re: Wells Fargo expects record Q1 earnings

The $100 billion in mortgage originations were probably funneled straight to FNM and FRE which the Fed bought.  I smell government money and relaxed accounting rules all over the WFC "results".

On another note, does this mean the taxpayers can have part of their $25 billion back from WFC now?

We might also note these excellent results:

[BJ] BJ's Wholesale Club March same store sales dip 0.1%
[ANF] Abercrombie & Fitch March same-store sales off 35%
[AEO] American Eagle March same-store sales down 16%
[GPS] Gap Inc. same-store sales fall 8% in March
[DDS] Dillard's March same-store sales down 19%
[M] Macy's March same-store sales down 9.2%

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Mish cites more deflation here

I agree something's not right with WF announcement. Here's Mish
Shedlock citing indicators of deflation in art auction, chain
restaurants, commercial leasing in NYC and boats:

http://globaleconomicanalysis.blogspot.com/2009/04/empty-restaurants-fal...

He says there's a shift to thrift. In this context, Wells Fargo's announcement doesn't quite match with our reality. 

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Re: Wells Fargo expects record Q1 earnings

Hmmmm.

Looking into this it would seem that Wells was supposed to report next week...but for some reason, on the Thursday prior to a long weekend and on the same day that miserable retail numbers were released, WFC announced early. There's some sort of a story there....

As unusual as that is, this little gem also raises a few questions:

It could not immediately be determined whether the $3 billion in net income was before or after dividends paid to the U.S. Treasury. The bank has issued $25 billion in preferred shares to the government.

Uh, maybe it's just me but that's a pretty significant thing to know...since preferred payments come out prior to the determination of net income we should be able to assume that the WFC announcement has already factored these payments out.

However, if I've learned anything lately, it's to assume nothing. 

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Follow Up: Wells Fargo
Follow Up: Wells Fargo CEO, on CNBC, says that given importance of
transaction with Wachovia, they wanted to get the news out into the m

(18.73 +3.84) -Update-
  As mentioned at 9:45, WFC CEO says that given importance of
transaction with Wachovia, they wanted to get the news out into the market. Says
a lot of good things happening in the quarter. Mortgage volume was very strong
in the qtr. Says main focus has been, and will continue to be, to grow earnings
to grow capital (essentially says no to the possibility of an equity offering).
Reiterates they would like to repay TARP as quickly as they can. Thinks
public-private partnership is a really good concept; something they are looking
at as a buyer and a seller.  from briefing.com
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Re: Wells Fargo expects record Q1 earnings

.... and

WFC Wells Fargo: 1Q09 beat on under-provision, credit trends
deteriorate - Friedman Billings
(18.66 +3.77) -Update-
  Friedman Billings notes that WFC pre-announced 1Q09 EPS of $3
bln, or $0.55 per share, above firm's $0.25 est and the $0.23 consensus. The big
difference vs. firm's model was the co's $4.6 bln provision, below firm's $6.25
bln est. While the mkt is reacting favorably to the EPS beat and the stronger
tangible common equity ratio, firm remains cautious based on what they don't
know. Most importantly, what happened to nonperforming loans and what would have
been net charge-offs excluding purchase accounting adjustments? What are the
trends in WFC's Option ARM portfolio? Did the co write up the MSR and what was
the new capitalized cost of servicing? Was there any benefit from an increase in
level 3 assets given recent accounting guidance? Firm hopes that these questions
will be answered when the co reports results on April 22. Firm believes that
credit quality materially deteriorated in Q1 and that WFC is under-reserving for
expected future losses.
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Re: Wells Fargo expects record Q1 earnings

Maybe they just needed to round up the last few suckers to pile on the rally train before it goes off the cliff?

I'm still waiting for Put entries.

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cmartenson
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Re: Wells Fargo expects record Q1 earnings

Well, that's the easiest way to "make money" at a bank:  Reduce your loan loss provisions.

I can't wait to hear what Wells saw in the data to cause them to reduce their loan loss provisions by 26%.   Must be they were writing better mortgage loans than everybody else but only figured that out early this morning?

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Re: Wells Fargo expects record Q1 earnings

Bloomberg wrote:
Christopher Whalen, a managing director at Torrance, California-based Institutional Risk Analytics, said in a Bloomberg Television interview today that the Financial Accounting Standards Board decision to relax accounting rules may have helped banks including Wells Fargo report a profit. “Most analysts are expecting loss rates to be much, much higher than we have seen in the last 20 to 30 years, even longer,” he said. “Given that, provisions of the large banks are not high enough.”

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aAfWu5.DWEmg

 I listened to Chris Whalen interviewed on Bloomberg this morning...commenting in even stronger language than the quote used in the article above, about how the numbers are probably not representative of the facts. I'm still searching for the video but it hasn't been posted yet.

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cat233
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Whalen Says Wells Fargo's `Rosy Scenario' Lacks Detail: Video

Hi Bradford,

Welcome to the site!

Cat

Here is the video Bradford mentioned.

Whalen Says Wells Fargo's `Rosy Scenario' Lacks Detail: Video April 9
(Bloomberg) --
Chris Whalen, managing director of Institutional Risk
Analytics, talks ...
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Re: Wells Fargo expects record Q1 earnings

They never release this type of news without a purpose in mind. I'm guessing they wanted to spark a buying spree such as we witnessed today. They saw the 'rally' fizzling out and pulled another 'financial sector' news release, much like the announcement in March by Citi and BAC...about how their January and February were just fabulous. What followed was the big March rally. The gov is pulling out all the stops to try to create a bottom out of thin air....much like the fed printing habits. I think it shows desparation. Another interesting bit of data to watch is the 10yr treasury. It is bouncing all over the place.

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r101958
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Re: Wells Fargo expects record Q1 earnings

....oh ...and 'they' = the gov't.

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Re: Wells Fargo expects record Q1 earnings

Thanks Cat!

 

This part was really on target:

 

Quote:
Whalen said: "by the time we have the detail for future losses, which is the real issue here, I think the public will have gotten the message that the banks want to deliver…I think the regulators are complicit as well as there are a lot of things moving around in the background…it’s going to be difficult to track the banks because they’re going to be different each quarter…and we’re going to have “chopped salad” as far as accounting treatments and other assumptions."
cat233's picture
cat233
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Re: Wells Fargo expects record Q1 earnings

Bradford wrote:

 

This part was really on target:

 

Quote:
Whalen said: "by the time we have the detail for future losses, which is the real issue here, I think the public will have gotten the message that the banks want to deliver…I think the regulators are complicit as well as there are a lot of things moving around in the background…it’s going to be difficult to track the banks because they’re going to be different each quarter…and we’re going to have “chopped salad” as far as accounting treatments and other assumptions."

Yeah, can't wait to hear what GS reports.

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Re: Wells Fargo expects record Q1 earnings

Wow WFC.  30% in a day.  Amazing how many buyers this market can still attract.    

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Re: Wells Fargo expects record Q1 earnings

Speaking from a guy who know the markets and is facing foreclosure, I can shed some insight. Since the tax payer bailout of 1 trillion on toxic mortgages, Wells fargo is free to announce they are free from the losses, now that the tax payer is taking care of any losses. Seems they don't want ot participate in the Obama bailouts like a lot of banks. They don't want to abide by the rules impossed by the government. Where does that leave home owners in trouble like me-Screwed! thats what.   The banks make money even in foreclosure, as they get a commission for there share holders. That means they make money in foreclosure. They didn't get any money modifiying loans. so Obama has a new bill giving the banks commissions to modify the loans. Problem is the banks are still being stingy and not wanting to participate in Obama's plan. They got what they wanted-tax payers bailout.

 I was told to go and get a second job and pay my mortgage. this is what Wells fargo is telling most people.

http://www.consumerwarningnetwork.com/2009/04/02/why-wont-my-mortgage-co...

 From nightline:

http://abcnews.go.com/Business/WireStory?id=7301883&page=1

http://abcnews.go.com/search?searchtext=house%20auctions&type=     march 10th 2009 

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cat233
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Re: Wells Fargo expects record Q1 earnings

From Briefing.com

WFC Wells Fargo: FBR reviews Q1 preannouncement; release was short on details (19.61 ) -Update-

WFC's 1Q09 preannounced results exceeded Friedman Billings expectations, but the release was short on details. Firm encourages investors to demand better disclosures going forward, and it is their sincere hope that WFC will revisit its long-held practice of not holding live quarterly public conference calls. They caution investors not to get too excited about growth in the tangible common equity ratio until they know how much of the improvement was one-time in nature (and 3.1% tangible common equity is still too low). Announced earnings surprised on the upside, largely based on lower credit costs and net charge-offs, but WFC gave no details on delinquency trends or Wachovia's credit losses. Based on everything they know about continued credit deterioration, they are skeptical, and find no clarity from what little information Wells Fargo has provided. They revise their 1Q09 EPS est to $0.55 from $0.25 and their 2Q09 EPS estimate to $0.30 from $0.20; both reflect lower up-front credit costs.

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plantguy90
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Re: Wells Fargo expects record Q1 earnings

DIAP,

Did you jump in? I'm already out Wink

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cat233
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Re: Wells Fargo expects record Q1 earnings

Re post #17

No he didn't, he is in DIA puts with me and we are still in.

Cat

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Re: Wells Fargo expects record Q1 earnings

plant -

What she said.

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