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
Jul. 10, 2014, 5:30 PM
Jul. 9, 2014, 10:17 AM
- "At some point all streaks come to an end," says Macquarie's David Konrad, noting Wells Fargo (WFC -0.2%) is at risk of ending its 17-quarter run of rising per share profits. One-time jolts from reserve releases or investment gains have helped plug holes left by declining mortgage banking income, but it may not be enough this quarter. Such items accounted for 26% of per share profit in Q1, up from 7% a year earlier.
- The bank would need to report $1.06 in EPS on Friday morning to keep the string going, but analysts are estimating a $1.01 print. Revenue is expected to decline by 3%.
- Previously: Wells downgraded at Macquarie
Jul. 8, 2014, 2:48 PM
- A federal judge denies Wells Fargo's (WFC -0.2%) motion to have an appeals court decide whether Los Angeles has legal standing to recover damages under the U.S. Fair Housing Act.
- L.A. is suing the bank and three others over predatory lending it says led to a wave of foreclosures and lost tax revenue. The same judge two months ago turned down another motion by the bank to have the case dismissed.
Jun. 30, 2014, 9:38 AM
- The year's stalwart performer among the big banks, Wells Fargo (WFC -0.6%) is cut to Underperform at Macquarie, the team citing the lender's high relative valuation.
- Wells Fargo is ahead nearly 16% YTD, while JPMorgan, Citigroup, and BofA are all in the red. Wells' performance also wins out when compared to major regional lenders like U.S. Bancorp, PNC Financial, and BB&T.
Jun. 26, 2014, 3:11 PM
- "Five years ago, if the risk group recommended against a strategy or product, it might just be one part of a debate," says Wells Fargo (WFC -0.4%) chief risk officer Michael Loughlin. Now, "when we say no, it's usually no."
- The naysayers are gaining power and multiplying across the banking industry as lenders bow to pressure from regulators to simplify and make safer their operations in the hope of preventing the next financial collapse. For its part, Wells has 2.3K employees in its core risk-management department, up from 1.7K two years ago, and the unit's annual budget has doubled to $500M over that period. Earlier this year, Goldman Sachs (GS -0.2%) made its chief risk officer part of the trader/rainmaker-dominated company management committee for the first time ever.
- The changes are expensive and come at a time of sluggish loan growth and trading revenue, but the banks have no choice as regulators wield the power given them by Dodd-Frank.
- KeyCorp (KEY +0.1%), for instance, used to pay loan officers for meeting profit goals. Now those bonuses can be lost if their work falls short of new risk-management standards. It's no doubt one factor behind sharply lower loan commitments for construction and real-estate development.
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Jun. 24, 2014, 1:11 PM
- Wells Fargo (WFC) filed for permission with the SEC to build its own set of active ETFs, a natural first step from its mutual fund business into the ETF universe.
- The Wells Fargo Advantage Ultra Short-Term Bond ETF is the initial fund proposed in the filling and will invest in short-term income-producing debt securities, including U.S. Government obligations, corporate debt securities, bank loans and mortgage- and asset-backed debt securities.
- Details on the fund are still in the works, including the expense ratio, ticker symbol and proposed launch date.
Jun. 20, 2014, 2:33 PM
- A deal between Ocwen Financial (OCN +0.9%) and the New York Dept. of Financial Services is near, reports Inside Mortgage Finance, with a source saying the Wells Fargo (WFC) matter "will come to a head shortly. That source also questions whether Ben Lawsky will charge Ocwen with anything at all.
- To review: New York DFS chief Lawsky - amid an investigation into Ocwen's servicing practices - put a moratorium on Ocwen's purchasing any more packages of mortgage servicing rights, including a $2.7B deal with Wells Fargo.
- Ocwen was up nearly 3% right after the rumor hit the wires, but has given back much of the gain.
Jun. 18, 2014, 5:02 PM
- The trustee units of Detusche Bank (DB), U.S. Bancorp (USB), Wells Fargo (WFC), HSBC, and Bank of New York Mellon (BK) face a lawsuit by an investor group led by BlackRock (BLK) and Pimco (and also including PRU and SCHW) over their role in overseeing and enforcing terms on more than 2K mortgage-backed bonds between 2004 and 2008.
- The group is seeking damages for losses on the paper that have surpassed $250B, reports the WSJ. At issue, say the plaintiffs, is the banks breaching their duty to bondholders by failing to force the lenders and bond issuers to repurchase poorly underwritten loans.
- A similar plaintiffs group has already won settlements from Bank of America and JPMorgan for their roles in originating and selling toxic mortgages.
Jun. 16, 2014, 12:43 PM
- A near-14% rally for Wells Fargo (WFC -1%) has brought its market cap to more than $270B and just about $10B shy of the record for banks of $282.75B set by Citigroup in 2001. Wells' rally this year is even more exceptional given declines posted by BofA, Citi, and JPMorgan.
- Lesson, writes the team at the WSJ: It's better to serve Main Street rather than Wall Street. While new regulations and the absence of volatility has stung investment bank profits, Wells Fargo has focused on its bread-and-buter businesses of commercial and consumer lending, and mortgage banking.
Jun. 10, 2014, 11:37 AM
- Wells Fargo (WFC -0.3%) had tried to convince a federal court that 2012's multi-bank mortgage settlement barred the government from suing again over home lending practices, but a three-judge panel says the settlement gives the government the right to pursue further action.
- The ruling is likely to increase pressure on the bank to settle a FHA mortgage lawsuit filed in October 2012.
Jun. 5, 2014, 11:30 AM
- The bank today launches a survey of about 250 middle-market companies' international growth to get a better idea of where said growth is coming from, what the business environment looks like, and their top concerns.
- Wells Fargo (WFC +0.3%) does have a presence in 35 countries outside the U.S., but its global banking operations pale in comparison to its big bank peers. The bank works with about 25% of U.S. middle-market companies - defined as those with revenue between $20M and $500M. Of those companies about 25% have operations overseas.
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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