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Sep. 16, 2013, 4:05 PM
- Wells Fargo (WFC +1.7%) reports a Tier 1 common capital ratio of 10.3% following 9 quarters of "severely adverse" economic conditions. That's up from 8.3% modeled at the March stress test, and well north of the 5% regulatory minimum.
- Like all of the other severe scenarios envisioned (see earlier stress test results), Wells' doomsday model assumes interest rates behave, i.e. head sharply lower.
- Wells Fargo 2013 Mid-Cycle Stress Test Results.
Sep. 13, 2013, 12:46 PM
- Following dour management commentary about the mortgage banking slowdown at investor conferences this week, Credit Suisse cuts 2013 EPS estimates at BAC, C, PNC. For Wells Fargo (WFC), estimates for 2014 and 2015 are revised lower by 1% due to worse-than-expected guidance for gain-on-sale margins. JPMorgan (JPM) and U.S. Bancorp (USB) see no cut in the out years as weaker revenue should be offset by better credit performance.
- Indeed, after hearing management commentary, Credit Suisse is forecasting loan-loss reserve declines at every bank in its coverage universe for Q3.
- JPMorgan's presentation is a good indication of what the banks are facing with regards to mortgages. Wells Fargo's too.
- Bank ETFs: KBE, KBWB, KRE.
Sep. 12, 2013, 3:30 PM
- Wells Fargo (WFC -0.6%) is looking to sell mortgage servicing rights on $41B of loans, reports Bloomberg.
- Likely buyers would seemingly include specialty mortgage servicers like Ocwen (OCN), Nationstar (NSM), and New Residential (NRZ).
- Banks have been unloading mortgage servicing rights as new capital rules make them too expensive to hold. Specialty servicers like those mentioned above have been happy buyers. For Wells, the move would free up capital, as well as provide an opportunity to book profits to offset the big slowdown in its mortgage origination business.
Sep. 11, 2013, 7:46 AM
- The 13.5% plunge in mortgage applications last week was adjusted to reflect the Labor Day holiday.
- The Refinance Index dove 20%, now off 71% from the May peak, and at the lowest level since June 2009. The Purchase Index dipped 3%.
- The average contract rate for a 30-year fixed mortgage rose 7 bps to 4.80%, with points increasing to 0.46 from 0.33.
- Amid numerous investor presentations by the banks this week, nearly all have warned about ugly Q3 mortgage production (and gain on sale) numbers coming up. Regional players like MTB, BBT, ZION, HBAN, as well as larger names like WFC and JPM will take note.
- ETFs of note: XLF, IYF, PFI, VFH, RYF, RWW, FAS, UYG, FAZ, SKF, SEF, IAI, FXO, PSCF, KBWD, KBWB, IYG, FINU, FINZ, KBE.
Sep. 9, 2013, 12:56 PM
- As other banks get out of the student loan business (JPMorgan is the latest), they're leaving more for Wells Fargo (WFC +0.1%) which continues to up its presence, and is now 2nd in the nation behind Sallie Mae.
- Toss in Discover Financial (DFS +0.9%) and the 3 originate more than 75% of the country's private student loans, according to S&P.
- For the bank, the loans offer a better interest rate than mortgages or auto loans, but also heightened regulatory oversight. Wells is currently working with the CFPB on modification programs for those loans that become delinquent.
- "It's no longer sustainable and not the right place to allocate capital in the future," said HSBC in 2007 when it shut down its subprime unit. Are student loans next?
Sep. 9, 2013, 9:54 AM
- Mortgage revenue - both from gain on sale margin and originations - is expected to continue to decline in Q3, says Wells Fargo (WFC +0.1%), presenting at the Barclays Financial Services Conference (slides). Gain on sale margins rose as high as 2.56% in late 2012 and early this year, but declined to 2.21% in Q2.
- Wells has been busy cutting expenses in its mortgage operation - employment ramped up by 10K to about 18K in the two years ending in Q1, but declined in Q2. Nearly another 3K cuts have been announced thus far in Q3.
- Also offsetting declining mortgage income in Q3 will be better credit performance - "absent significant deterioration in the economic environment," expect larger reserve releases going forward.
Sep. 4, 2013, 6:57 PM
- There's been no change in the list of top 10 holdings of Morningstar's Ultimate Stock Pickers so far this year, but one wonders about the fate of Microsoft (MSFT) after its much criticized purchase of Nokia's main handset business; it had been the top high-conviction holding in the group.
- The top 10 holdings: MSFT, GOOG, WFC, JNJ, BRK.B, AIG, PG, WMT, PEP, UPS.
- Among purchases during the most recent period, National Oilwell Varco (NOV) topped the top 10 list of high-conviction buys, followed by WFC, GM, SLB, INTC, AAPL, XOM, APA, CHRW, EMC.
Sep. 3, 2013, 2:10 PM
- Worst-case estimates of legal losses stemming from pre-crisis mortgage sales at the three largest U.S. banks "are clearly manageable," says Drexel Hamilton's David Hilder. His conclusion comes after studying "reasonably possible losses" in the Q2 filings of BAC, C, JPM, and WFC.
- "Initial estimates of mortgage-related losses and litigation settlement costs were too low ... at this point, more than 5 years since the mortgage-driven parts of the crisis began to explode ... we believe the banks' estimates ... are likely to be more accurate than externally-derived estimates."
- Hilder's view is the consensus one, but (surprise) CLSA's Mike Mayo says Bank of American faces billions more in potential losses owing to the challenge to its $8.5B settlement to resolve $107B in investor losses. The Article 77 hearing over that matter resumes on September 9 following a summer recess.
Aug. 28, 2013, 11:41 AM
- Maybe a victory for prospective homeowners, but certainly a victory for anyone dependent upon a speedy housing market, the new proposal for the Qualified Residential Mortgage rule (QRM) is quite a bit less-restrictive than the original version.
- The new standard would allow a no downpayment option similar to that allowed by the CFPB - that rule protects banks from being sued by mortgage investors on zero-down loans as long as the borrower's debt to income ratio is less than 43%.
- The new plan also requires banks to hold onto a slice of mortgages (for those with less than 20% down) when debt/income is above 43% as opposed to 36% in the initial proposal.
- The agencies will await public comment before a vote on the final rule.
- Homebuilders, mortgage bankers, and realtors look on with interest.
- Related: WFC, BAC, C, JPM, XHB, ITB, RLGY.
Aug. 28, 2013, 4:10 AM
- The U.S.'s six largest banks have accumulated legal costs of $103B so far since the financial crisis, Bloomberg calculates, noting that the figure is greater than the amount they've paid in dividends in the past five years.
- Legal fees and litigation costs account for $56B and the rest is for payments to mortgage investors.
- JPMorgan's (JPM) legal bill is $21.3B while it has allocated $8.1B for mortgage buybacks. Bank of America's (BAC) legal expenses are $19.1B and its repurchase provisions $28.6B. The other banks are Citigroup (C), Wells Fargo (WFC), Goldman (GS) and Morgan Stanley (MS).
Aug. 22, 2013, 4:35 PM
- Goldman Sachs (GS), JPMorgan (JPM), Morgan Stanley (MS), and Wells Fargo (WFC) are on review for downgrade as the agency considers reducing its assumption for how much government support they're likely to get.
- Bank of America (BAC) and Citigroup (C) are also on review, but for "direction uncertain" as Moody's considers what may be more than offsetting improvements in their standalone credit strength.
- Mellon Bank (BK) and State Street (STT) - whose ratings are already under the scope - will also be included in this new review.
- Moody's telegraphed its intention to undertake this move back in March.
- All of the above stocks are off marginally in AH trade.
- Source: Moody's.
Aug. 21, 2013, 4:11 PM
- Declining demand for refinancing has Wells Fargo (WFC) announcing more than 2.3K job cuts nationwide today. It's the 4th - and by far the largest - round of of cuts since June.
- Included are 365 jobs in Birmingham, Alabama where employees were given 60 days notice today.
- That the mortgage division is not doing great isn't new news (see Q2 earnings), and management insists as some divisions within the bank struggle, others improve.
- Earlier: Continued soft refinance application numbers from MBA.
Aug. 13, 2013, 11:03 AM
- BMO Capital's Lana Chan plugs Fed rate hikes into her models and raises price targets on eight regional banks. Her assumptions are rate hikes beginning in mid-2015 and totaling 100 bps by the end of the year, with another 100 bps of hikes by the middle of 2016 - a total off 200 basis points over one year.
- Hold-rated BB&T (BBT +0.3%) is upped to $40 from $38, Comerica (CMA -0.2%) to $42 from $41, PNC Financial (PNC -0.7%) to $78 from $76, SunTrust (STI -0.3%) to $36 from $35, U.S. Bancorp (USB -0.4%) to $39 from $38, and Wells Fargo (WFC -0.1%) to $47 from $46.
- M&T Bank (MTB -0.7%) - still awaiting approval of its buyout of Hudson City Bancorp (HCBK -0.6%) - is lifted to $124 from $117.
- Buy-rated Fifth Third (FITB -1.3%) with price target $22, KeyCorp (KEY -0.4%) with price target $14, and Zions (ZION -1.7%) with price target $33 receive no boost, but Regions Financial (RF -0.1%) is lifted to $13 from $12.
- Many banks disclose their own analysis - but these (probably like Chan's) assume a "parallel" increase in rates in which the yield curve shape doesn't change. By their own analysis, Zions see itself benefitting more than its competitors, with net interest income to rise 18.1% on a 200 bp parallel increase in rates.
- Regional bank ETFs: IAT, KBE, KRE, RKH, QABA, KRU, KRS, KBWR.
Aug. 6, 2013, 3:10 PM
- Wrapping up this week is trial number two for Wells Fargo (WFC -0.6%) over its securities lending program in which investors claim they were misled by company marketing to believe they were engaged in a safe practice only to lose millions.
- "Nothing Wells Fargo did or did not do harmed investors," says an attorney for the bank in closing arguments. "You can find yourself in a position ... where all of a sudden your securities are illiquid, you can't sell them."
- Wells lost case #1 for about $30M. A class action suit is next, and then there are two more cases set for next year.
Jul. 23, 2013, 5:07 PMWells Fargo & Co. (WFC) declares $0.30/share quarterly dividend, in line with previous. Forward yield 2.69%. For shareholders of record Aug. 9. Payable Sept. 1. Ex-div Aug. 7. (PR) | Jul. 23, 2013, 5:07 PM
Jul. 23, 2013, 3:28 PMSign of the times: The world's largest bank by market cap is no longer a Chinese one as Wells Fargo (WFC) overtakes Industrial & Commercial Bank of China for the top spot. ICBC had wrested the #1 ranking from Citigroup in 2007 as the Western credit bubble was just beginning to blow. "There's been a complete 180 degree turn in perceived danger," says an observer. "The U.S. banks are exiting danger and Chinese banks are entering." | Jul. 23, 2013, 3:28 PM | 10 Comments
Wells Fargo & Co is a diversified financial services company. It provides retail, corporate and commercial banking services through banking stores and offices, the internet and other distribution channels to individuals, businesses and institutions.
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