Aug. 26, 2014, 1:25 PM
- "We're just not going to make those loans and there's going to be a whole bunch of Americans that are underserved in the mortgage market," says Wells Fargo (WFC +0.2%) chief John Stumpf, warning (in an FT interview) the GSEs to stop being so quick to accuse banks of faulty underwriting and then forcing them to repurchase soured loans.
- Fighting the last war, regulators are demanding more rigorous underwriting and tighter lending criteria, but evidence is beginning to grow (especially if you ask banks!) that the pendulum has swung too far.
- Stumpf: "If somebody makes a payment for - let’s say - three years, the risk ought to transfer then to the insurance company ... If you’re going to pick through each one looking for a technical fault not to pay your insurance policy we’re not going to be in that business.”
- Jamie Dimon (JPM +0.8%) last month: "We want to help consumers there, but we can’t do it at great risk to JPMorgan ... We’re going to be very very cautious in that line of business.”
Aug. 21, 2014, 9:26 AM
- "It's definitely politics," Dick Kovacevich says of Bank of America's $16.65B mortgage settlement. "It has nothing to with justice or restitution to the innocent victims. In fact, more of the money is going to the coffers of the states and various departments than the victims."
- Wells Fargo (NYSE:WFC) shareholders who remember the legal onslaught brought upon JPMorgan when Jamie Dimon dared to question U.S. regulators, can be thankful Kovacevich is a former chairman and CEO of their bank.
- Kovacevich: "[Neither] JPMorgan or its employees [nor] Bank of America or its employees did anything wrong here. They just bought companies that did wrong ... Why are we charging the stock holders instead of going after the people who did wrong? Corporations don't engage in criminal behavior. They don't take advantage of innocent people. People do."
Aug. 20, 2014, 9:14 AM
- The Wells Fargo Startup Accelerator will be a semiannual "boot camp" for tech startups in the areas of payments, deposits, fraud, operations, and other financial services areas. Wells Fargo (NYSE:WFC) will make a direct equity investment of $50K to $500K in each selected startup.
- Applications are being accepted through October 1. "We need to expand our access to new ideas at the edges of our industry," says Steve Ellis, head of Wholesale Services at the bank. Three companies have already been selected and funded.
- Press release
Aug. 19, 2014, 3:09 PM
- Known internally as the "Big Hairy Audacious Goal," Wells Fargo (WFC +0.2%) aims to double the size of its asset-management operation to more than $1T of AUM over the next decade through (small) acquisitions and aggressive selling to big-fish investors, reports the WSJ.
- The move comes as other parts of Wells' business - notably mortgages - stagnate (bank revenue fell 1.5% Y/Y in Q2), and major acquisitions are pretty much verboten in today's regulatory environment.
- Investors may be steering away from mutual funds and toward passive products like ETFs and index funds, but it hasn't stopped JPMorgan from racking up $17B of inflows in 2013, and another $17.5B so far this year. Wells, on the other hand, saw $1.6B of outflows in 2013 and another $1B YTD. Goldman Sachs - the only other of U.S. banks ranking among the top 50 asset managers - like JPMorgan, also saw sizable inflows during this period.
Aug. 14, 2014, 11:34 AM
- Loan officers' top commission rate rose to 70 basis points from 63, according to Bloomberg, and the new policy - which took effect on July 1 - also merges two lower tiers into one that pays 65 bps instead of 48 or 58.
- “By adjusting those tiers we created a lot of desire for the loan officers to go out and get that extra production,” says Franklin Codel, who oversees mortgage origination for Wells (WFC +0.7%). “This creates that little extra incentive.”
- With the refinancing boom finished, lenders are trying to find business by funding new home purchases, but those deals usually require more effort than a refi, and the big players are losing talent to smaller firms with better pay packages and shorter turnaround times for closing deals.
Aug. 13, 2014, 3:14 AM
- Bank officials, trade groups and lawmakers are quietly pressing the Federal Reserve for a delay of up to seven years regarding the rule that limits their investments in private-equity and venture-capital funds
- The "Volcker rule," part of the Dodd-Frank legislation, restricts banks' ownership stake in hedge funds and private equity funds, and prohibits banks from making speculative bets with their own money.
- Regulators finalized the rule in December but agreed not to enforce it until 2015.
- Related tickers: JPM, C, BAC, WFC, GS, MS, BK, STT, ZION
Aug. 8, 2014, 3:15 PM
- Notably missing from the list of major banks whose "living wills" were stingingly rebuked by the FDIC and the Fed earlier this week is Wells Fargo (WFC +0.4%), writes the WSJ's David Reilly.
- "Size alone doesn't make a firm a [systemic] threat," says Reilly, noting Wells' $1.6T in assets is nearly double that of Goldman Sachs and Morgan Stanley. Wells, however, was not included int he so-called first-wave banks initially having to submit resolution plans because its non-bank assets aren't greater than $250B.
- "In banking today," writes Reilly, "simplicity is a virtue, no matter your size."
- Previously: Feds reject "living wills" of 11 major lenders
Aug. 6, 2014, 3:40 PM| Comment!
Jul. 22, 2014, 4:51 PM
Jul. 18, 2014, 6:48 PM
- The big banks aren't quite ready to let go of their reserve releases: The big four - JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC) - released a combined $2.25B of their bad-loan reserves in Q2, up nearly 20% from the $1.88B they released in Q1.
- The banks continue to see improvement in their customers’ credit quality, but their earnings continue to rely in part on freeing up some of their rainy-day cushions, rather than being able to generate strong earnings from their operating businesses.
- Even with the Q2 uptick, the banks are releasing less in the way of reserves than they have for most of the past four years, and analysts see the practice ending before too much longer.
- Some regional banks such as Comerica (NYSE:CMA) and Huntington Bancshares (NASDAQ:HBAN) that had been releasing reserves started building their reserves up again by small amounts during Q2.
Jul. 16, 2014, 3:28 PM
- It's another shakeup in Wells Fargo's (WFC -0.3%) management team following the naming of John Shrewsberry to replace Tim Sloan as CFO, with Tom Wolfe - who oversees two of the bank's fastest-growing consumer businesses, credit cards and auto lending - set to leave later this year.
- Wolfe came over as part of 2008's purchase of Wachovia, and led Wells Fargo's effort to overtake Ally Financial as the country's largest auto lender. He was also behind a big move to expand credit card lending, and so-called credit-card penetration rose to 39% in Q2 from 34.9% a year prior. Outstanding balances rose 9.7% to $27.2B.
Jul. 14, 2014, 10:45 AM
- Wells Fargo (WFC -0.5%) is sliding again, despite the boost provided to other big U.S banks by Citigroup’s (C +3.4%) earnings, as investors remain disappointed with WFC's Q2 results and J.P. Morgan downgrades shares to Neutral from Overweight.
- WFC faces more near-term headwinds - a modestly higher expense run rate, lower fee revenue growth, higher taxes - to its revenue growth initiatives, JPM says as it cuts its 2014 and 2015 EPS estimates to $4.15 from $4.21 and to $4.32 from $4.37, respectively.
- WFC has been the top performing big bank, outperforming peers by ~700 bp YTD, but the firm sees relatively less upside to the stock with lower EPS estimates and the share price close to its new $52 price target (down from $54.50).
Jul. 11, 2014, 3:58 PM
- Wells Fargo’s (WFC -0.7%) disappointing Q2 results could be good news for PNC Financial Services (PNC +0.4%), Fifth Third (FITB +1%), KeyCorp (KEY +0.1%) and Comerica (CMA +0.5%), according to Nomura analysts.
- The strength in WFC’s commercial loan portfolio - total core loan growth came in at 6.9% Y/Y, up from 5.6% last quarter - bodes well for other regional banks, given high C&I growth correlations (~80% or higher); total loan growth correlations also exceed 90% for PNC, FITB, KEY and CMA.
- The firm notes that the R-squared between earning asset growth and net interest income growth is 98% for regional banks, suggesting that stronger loan growth will lead to positive EPS revisions.
Jul. 11, 2014, 2:15 PM
- Wells Fargo (WFC -0.6%) CFO John Shrewsberry warns investors in the bank's earnings conference call that loan loss reserves - an important source of profits for WFC and other banks as credit quality has improved over the past four years - will dwindle, as WFC expects to release reserves at a lower rate going forward.
- WFC reported a slight gain in profits for Q2 yet revenue slipped, as did its net interest margin; if the trend continues, it will become more difficult without the release of reserves to keep growing earnings and maintain its 16-quarter streak of higher profits.
- In the call, one analyst said he guessed that “Wall Street will be somewhat shocked” when the reserve releases and the ensuing profit boost evaporate.
Jul. 11, 2014, 8:20 AM
- Net income of $5.7B up 4% Y/Y. EPS of $1.01 up 3%.
- ROA of 1.47% slips from 1.57% in Q1, 1.55% a year ago.
- ROE of 13.4% slips from 14.35% in Q1, 14.02% a year ago.
- Net interest income of $10.8B gains $176M from Q1, with NIM of 3.15% down five basis points thanks to strong deposit growth, but not enough to do with the money.
- Noninterest income of $10.3B up $300M from Q1, with mortgage banking income halting its steep decline - it rose to $1.7B, up $213M from Q1. One would expect a gain thanks to seasonality though - on a Y/Y basis, mortgage banking income fell 39%. Overall noninterest income fell 3% Y/Y.
- Noninterest expense of $12.2B up $246M from Q1 and essentially flat from a year ago.
- Common Equity Tier 1 ratio of 11.31% vs. 11.36% in Q1, 10.71% a year ago. 39.4M shares were repurchased during Q2, plus an estimated 19.4M shares through a forward repurchase deal expected to settle in Q3.
- Credit losses of $717M in Q2 vs. $1.2B a year ago. Bank releases $500M for its credit loss allowance (vs. total income of $5.7B), but expects lower level of releases going forward.
- Conference call begins at 10 ET.
- Previously: Wells Fargo EPS in-line, beats on revenue
- WFC -0.3% premarket
Jul. 11, 2014, 8:07 AM
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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