rb1253

Talk Me Down From the Wells Fargo Ledge

Paul -- Wells didn't pull the trigger on WAMU and WACHOVIA because of two things -- they won't dilute their earnings so much hurting their shareholders and their culture -- not because they feared any problems within their own portfolio-- it has always been this way with them -- just look at their acquisition history . Also forget the issue of increasing the write-off period from 120 days to 180 days -- the amount of loans impacted by this is significantly less than the excess reserves they put back in the 2nd quarter --and that WAS excess reserves. When they remove the mark to market this bank is going to be very strongly capitalized compared to its peers --they are not the ones out there selling the securities at basement bargain prices to get cash -- so this has hurt them probably more than others and eliminating it will then help them more than others. It is buying quality loans from cash strapped financial institutions furthering strengthening its portfolio. Look at its revenue growth over the past year in spite of the economy, financial crisis, liquidity crisis etc. --double digit .Look at its margin. They will be least hurt by the current environment because of credit quality, strong capital position and significant liquidity (deposit base --not Warren) -- they are also still able to grow while others must shrink due to low capital --deposits are flowing into this organization daily further fueling their abiliy to grow while others are retrenching -- that is why so many are so high on this company. Something that is difficult to determine just by looking at the financials is the culture -- conservative in terms of risk, aggressive sales, and customer focused (which is why they did not issue those ARMs --couldn't see how it would help the customer) --they are not focused on short term quarterly results -- and they are not a company that believes big makes you better --they believe being better will make them big. Quite a different culture than the greedy market share driven organizations that are now falling by the wayside. Along with what P4321 states above about differences in loan portfolios --it is also a difference in the decision-making process by the management team at that bank --may be hard for people to believe in this day and age but they have integrity. They do the right thing for their shareholders, their employees, and their customers. It has added some protection to the their balance sheet. They are reeping the benefits now, and will be positioned to outperform their peers significantly well after this crisis is over.