Oct. 15, 2014, 10:49 AM
- Bank earnings models will no doubt need to be tweaked as the sure thing of higher rates becomes somewhat less sure, with the 10-year U.S. Treasury yield plunging all the way down to 2%, and 30-day Fed Funds futures - just weeks ago pricing in 100% chance of a rate hike by June 2015 - now sees no move until December 2015.
- The XLF is lower by 1.9% and the Regional Banking ETF (NYSEARCA:KRE) is down 2.1% (the S&P 500 is off a mere 1.1%). Among individual names, KeyCorp (KEY -6.4%), First Bancorp (FBP -6.4%), Regions Financial (RF -4%), U.S. Bancorp (USB -2.2%), Fifth Third (FITB -2.6%), Bank of America (BAC -4%), Citigroup (C -3.3%), JPMorgan (JPM -2.8%), Wells Fargo (WFC -1.9%).
- Financial ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, FNCL, KBWB, RKH, QABA, FINU, KRU, RWW, KBWR, RYF, FINZ, KRS
- Life insurers were also waiting on higher rates and they're slipping more than the averages as well. MetLife (MET -3.7%), Prudential (PRU -2.9%), Manulife (MFC -3.5%) Sun Life (SLF -3.4%), Lincoln Financial (LNC -3.9%).
- Insurance ETFs: KIE, IAK, KBWP, KBWI
- Previously: BofA call: Assumption about higher rates not so sure anymore
Oct. 14, 2014, 10:36 AM
- Credit quality is the best he's seen in his more than 32 years at the bank, says Wells Fargo (WFC -1.7%) chief John Stumpf, leading off the earnings call.
- Webcast and presentation slides
- The housing market, he says, has not fully recovered as tight inventory, slower household formation, high student loan debt, and tough lending standards hold things back.
- Taking over the call, CFO John Shrewsberry says 48.7M shares were repurchased during the Q (net share reduction during quarter of 34.9M), and the bank entered into a $1B forward repurchase deal expected to settle in Q4 that should retire another 19.8M shares. Between the dividend and buybacks, $3.6B was returned to owners during Q3.
- As for reserve releases, which fell to $300M during Q3 from $500M a quarter ago, Shrewsberry expects them to keep slipping as there's little room left for credit improvement.
- Previously: Wells Fargo slips after inline results
Oct. 14, 2014, 8:30 AM
- Q3 net income of $5.7B or $1.02 per share up 3% from a year ago.
- Net interest income of $10.9B up $150M from Q2, as strong asset growth was offset by a nine basis point drop in net interest margin to 3.06% - consumer deposits are rushing in, but bank is having trouble finding someplace to invest the cash.
- Noninterest income of $10.3B is flat from Q2, with mortgage banking income of $1.6B off $90M. Residential mortgage originations of $48B were $1B higher on the quarter.
- Noninterest expense of $12.2B increased $54M from Q2. The efficiency ratio improves to 57.7% from 57.9%.
- Total loans of $838.9B up $9.9B from Q2.
- Conference call at 10 ET
- WFC -0.9% premarket
- Previously: Wells Fargo EPS in-line, beats on revenue
Oct. 14, 2014, 8:04 AM
Oct. 13, 2014, 5:30 PM
Oct. 13, 2014, 10:55 AM
- Credit-cards have historically been more of an "accommodation" for branches rather than a serious business at Wells Fargo (WFC +0.2%), says Beverly Anderson, head of the bank's consumer financial services.
- Things, though, are quickly changing at what is just the country's 7th largest issuer, in part thanks to the purchase of Wachovia in 2008 which greatly expanded Wells' branch network east of the Mississippi. "We can sell a card to a customer at a fraction of the cost of someone else from the outside," said CEO John Stumpf a few months back.
- Competitors are noticing: "We have increasingly started tracking Wells Fargo," says Discover chief David Nelms.
- Wells Fargo has picked up 2M new customers in the past year, credit-card purchase volume was up 16% Y/Y through June 30, and credit-card household penetration grew to 39% from 35%.
Oct. 13, 2014, 8:00 AM
- When you're a hammer, everything looks like a nail. In what smells like another foray by the Consumer Financial Protection Bureau, with other agencies possibly joining in, banks are reportedly under investigation for lending ... this time for automobiles.
- Amid an otherwise sluggish loan market - especially for mortgages - auto lending has experienced rapid growth over the past few years, particularly subprime lending, and those in that business - Santander Consumer being one - are already under examination by the CFPB.
- At issue for banks is not just the direct auto loans they're making, but the financing they're providing to shops like Santander Consumer.
- Wells Fargo (NYSE:WFC) is the largest U.S. auto lender, with $50.8B in loans outstanding at the end of last year, roughly $15B of which was subprime. In addition, the bank has extended since 2011 more than $1.5B of credit lines to the country's largest subprime lenders. Other sizable players include Capital One (NYSE:COF) and JPMorgan (NYSE:JPM).
- "Banks are making a lot of money off these (auto) loans in many different ways," says the head of a consumer advocate group. Isn't that what they're supposed to do?
- "The subprime auto sector appears too small to present a systemic risk," says BAML's Michael Hanson.
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, FNCL, KBWB, RKH, QABA, FINU, KRU, KBWR, RWW, RYF, KRS, FINZ
Oct. 1, 2014, 3:58 PM
- The suit - which is seeking class action status - claims Wells Fargo (NYSE:WFC) and Citigroup's (NYSE:C) CitiMortgage violated federal law by falsely notifying credit reporting agencies that thousands of homeowners went through bankruptcies or foreclosures (Experian is also a defendant).
- The lawsuit claims the mistakes were made after mortgage customers of the two banks sold their homes in a short sale, which is very much not a bankruptcy or foreclosure. The banks, says the plaintiffs, nevertheless reported bankruptcies and foreclosures to credit bureaus and correct their mistake when notified.
- In other Citi news, a Delaware court has ordered the bank to turn over records related to its Banamex unit to a Oklahoma pension fund which wants to know what Citi executives knew and when they knew it.
Sep. 25, 2014, 3:09 PM
- Today's resignation of Attorney General Eric Holder could mark the beginning of the end of the Justice Department’s push to hold big banks accountable for their conduct leading up to the financial crisis.
- Several big banks, including Goldman Sachs (GS -2.1%) and Wells Fargo (WFC -1.1%), are still under investigations by the Justice Department for their sale of flawed mortgage securities before 2008, but settlements in those cases are expected to be much smaller than the big sums extracted from Bank of America (BAC -1.8%), JPMorgan Chase (JPM -2%) and Citigroup (C -2.2%).
- Another sign that the big bank cases may be winding down: Tony West, who was Holder’s point man in the bank settlement talks, recently left the Justice Department to join PepsiCo as its general counsel.
Sep. 18, 2014, 12:53 PM
- Banks, insurers, brokerages and anything else starved for yield continue to gain following yesterday's FOMC news. Among the gainers are Bank of America (BAC +1.9%) - which breaks above $17 for the first time since April - Citigroup (C +2.7%), Wells Fargo (WFC +1.1%), PNC (PNC +1.1%), Fifth Third (FITB +1.7%), SunTrust (STI +1.2%), Schwab (SCHW +2.3%), Prudential (PRU +2.5%), and Lincoln National (LNC +2.4%).
- The XLF +1.2%, KBE +1.5%, and KRE +2%.
- Financial sector ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, KBWB, FNCL, RKH, QABA, FINU, KRU, KBWR, RWW, RYF, KRS, FINZ
- Lit up bright red is the utility sector (XLU -1%), led by Southern Company (SO -1.1%), Dominion Resources (D -1.2%), Duke Energy (DUK -1.4%), and Pinnacle West (PNW -1.9%).
- Utility ETFs: XLU, IDU, VPU, UPW, RYU, FUTY, PUI, FXU, SDP, PSCU
Sep. 11, 2014, 7:08 PM
- After moving back above the $100/share level, Apple (NASDAQ:AAPL) is back over the $600B mark in market cap, pushing it nearly $200B above Exxon Mobil (NYSE:XOM), the next largest company in the U.S.
- XOM is still valued at more than $400B, but Google (NASDAQ:GOOG) at $397B and Microsoft (NASDAQ:MSFT) - which has surged in 2014, adding $74B in market cap to $386B - are closing the gap.
- Berkshire Hathaway (NYSE:BRK.B) completes the top five with a $339B market cap; no other companies are worth more than $300B.
- Rounding out the top 20 market caps: JNJ, WFC, GE, WMT, CVX, PG, JPM, FB, VZ, IBM, PFE, KO, ORCL, T, MRK.
Sep. 10, 2014, 8:03 AM
- It's my favorite slide, says Wells Fargo (NYSE:WFC) CFO John Shrewsberry, presenting at the Barclays Financial Services Conference. He's referring to page 23 of his presentation which shows Wells' performance across certain key metrics vs. its peers.
- Whether its ROA, ROE, efficiency ratio, or payout ratio, Wells Fargo ranks near the top, whether compared against the TBTFs or against regional players (though USB consistently ranks higher ... kudos).
- As for the proposed tough capital rule which made news yesterday, Shrewsberry says regulators have been talking about it for some time, he believes they're serious, the tougher ratios will come to pass, and his bank is prepared.
- Echoing his CEO John Stumpf from a couple of weeks ago, Shrewsberry says the current mortgage regime - where GSEs threaten to put back to lenders any mortgages which don't perform, no matter how many years have gone by - is not a viable business model for the bank.
Sep. 9, 2014, 12:24 PM
- The Fed intends to impose a capital surcharge on banks tougher than the international standard, according to Fed Governor Daniel Tarullo's prepared remarks for the Senate Banking Committee. Those banks with heavier reliance on short-term funding like overnight loans - i.e. Goldman Sachs (GS -1%) and Morgan Stanley (MS -1.8%) - will likely face even more rigorous requirements.
- Officials haven't yet decided on a number, but reportedly are considering as much as 200 basis points more than the top range of 2.5% of risk-weighted assets agreed to by international regulators.
- What's not yet clear is who would need to raise capital to meet the new, tougher standard.
- Citigroup (C -1%), Bank of America (BAC -0.6%), JPMorgan (JPM -1.3%), Wells Fargo (WFC -0.4%), State Street (STT -1.1%), Bank of New York Mellon (BK -0.9%)
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, IAI, SEF, IYG, FXO, FNCL, FINU, KCE, RWW, RYF, KBWC, FINZ
Sep. 4, 2014, 3:18 AM
- U.S. regulators have approved of the proposed liquidity rules to safeguard banks in case of a financial crunch.
- The rules are requiring large U.S. banks to load up on ultra-safe assets to ensure enough cash and securities to fund their operations for 30 days. Separate liquidity rules for foreign banks will be drawn up at a later date.
- Big banks will need to hold a total of about $2.5T in easy-to-sell assets by 2017, which would result in a $100B shortfall if the threshold applied today.
- Related tickers: JPM, C, BAC, WFC, GS, MS, BK, STT, ZION
- Previously: Bank regulators to vote on new liquidity rules
Sep. 3, 2014, 2:39 AM
- Bank regulators are expected to finalize rules today that would require banks to hold capital against every asset on their books, and approve of a "liquidity-coverage ratio", which would require large banks to load up on ultra-safe assets to fund their operations for 30 days.
- The new rules have Wall Street concerned due to the likely harm to earnings and lending restrictions, although regulators say the policies will create a safer financial system.
- Related tickers: JPM, C, BAC, WFC, GS, MS, BK, STT, ZION
Aug. 28, 2014, 8:04 AM
- Maybe not wanting competition for federal government debt, U.S. regulators are set to approve a final liquidity rule next week reportedly excluding municipal bonds from being among banks' high-quality, highly liquid assets. Treasurys and balances held at the Fed, of course, would be allowed.
- Wells Fargo (NYSE:WFC) - with $47.3B - is the largest holder of municipals among the four largest U.S. banks. It hasn't said how much of that amount is included in its liquidity tally, but did say it was compliant with the international rule and awaiting the final U.S. version.
- Both banks and local governments had naturally argued to include munis in the final rule. "[This] will almost certainly decrease liquidity in asset markets disfavored by the rule," says ABA President Frank Keating.
- Muni ETFs: MUB, PZA, TFI, XMPT, PRB, PVI, VRD, RVNU, FMB
- Financial sector ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, SEF, IYG, FXO, FNCL, FINU, RWW, RYF, FINZ
WFC vs. ETF Alternatives
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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