Wells Fargo: Bright Star in the Financial Universe?

Wells Fargo (WFC) announced Q2 ‘08 earnings on Tuesday that seem to indicate that the bank is rising above the subprime mess/credit crisis fray (see conference call transcript).

Despite increasing loan loss provisions that caused Q2 net income to drop 23%, revenues rose to record levels and the bank actually increased its dividend. The stock was up about 25% in early trading Wednesday.

Following are highlights from the the bank’s earnings release.

• Net income of $1.8 billion compared with $2.3 billion a year ago
• Diluted earnings per share of $0.53 compared with $0.67 a year ago
• Record revenue of $11.5 billion, up 16 percent from prior year and 34 percent (annualized) from prior quarter
• Record cross-sell for both retail and commercial customers
• Provision for credit losses of $3.0 billion (including reserve build of $1.5 billion)
• Positive operating leverage (revenue growth of 16 percent; expense growth of 2 percent from prior year)
• Average loans up 18 percent from prior year and 8 percent (annualized) from prior quarter
• Average earning assets up 20 percent from prior year and 15 percent (annualized) from prior quarter
• Net interest margin of 4.92 percent, up 23 basis points from prior quarter
• Tier 1 capital of 8.24 percent, up from 7.92 percent at March 31, 2008, and 7.59 percent at December 31, 2007

Disclosure: none

Comments

[paulmars:]

Smoke and mirrors and Buffett halo keep this levitated, for now. The recession will catch up to all those hundreds of billions of consumer loans, mostly written at the top of the boom, and mostly all recession-sensitive.
They may be among the last to fall, but fall they will.
They are leveraged 10-to-1 going into a recession/depression, and that ain't good, even grading on the curve.

2008 Jul 17 02:51 AM