On Tuesday, January 17, 2012, before the markets open, Wells Fargo (WFC), the largest U.S. financial based on market capitalization, reported a 20 percent increase in fourth-quarter profit, above most analyst estimates.
See a recent WFC performance chart, below:
Wells Fargo reported that the bank's net income increased to $4.11 billion, or 73 cents per share, compared to $3.41 billion, or 61 cents, in the Q4 of 2010. The bank also indicated that it intends on increasing its dividend. More specifically, John Stumpf, the bank's Chief Executive Officer, commented that WFC intends on "returning even more capital to our shareholders."
Such comments will likely be well received by those shareholders, including Warren Buffett's Berkshire Hathaway (BRK.A)(BRK.B), the largest WFC shareholder, currently holding about $10.8 billion, or 6.85% of the bank's shares. Its current quarterly dividend now sits at 12 cents per share, after starting 2011 at five cents per share
Wells Fargo continues to report results that distance itself from most other large banks in the United States in regards to consistent attempts to act more like a traditional, conservative bank. Though the bank was down about 11 percent in 2011, WFC is still the largest bank in terms of market value, at about $20 billion more than JPMorgan Chase (JPM), the next closest behemoth. Nonetheless, JPMorgan is the largest U.S. bank in terms of assets held.
Moreover, due to the even worse 2011 performance by financials such as Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (MS), both JPM and WFC are now each as large as the combined market values of these other three well-known financials. Last year, in terms of market value, BAC alone was of comparable size to JPM or WFC.
Wells Fargo is also still the largest residential lender in the United States, and could sustain some litigation-based losses from claims by RMBS investors. Much of WFC's exposure in this arena comes from its acquisition of Wachovia, which Wells bought about three years ago. Wells Fargo also set aside $2.04 billion for credit losses and reported $2.64 billion in net loan writedowns, causing a reserve release of $600 million.
Citigroup (C), another large U.S. bank, also reported on Tuesday, announcing that fourth-quarter profit fell 11 percent, compared to consensus expectations for a profit increase. Net income fell to $1.17 billion, or 38 cents a share, from $1.31 billion, or 43 cents, for the same quarter in 2010. Much of Citigroup's poor comparative performance was caused by its exposure to investment banking and trading, where WFC has a smaller profile.
Goldman Sachs is scheduled to release its Q4 2011 report on Wednesday, January 18, while both Bank or America and both Bank of America and Morgan Stanley are due to report on Thursday.
Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.