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Let’s Review the Wells Fargo Earnings

Posted by Larry Doyle on April 9, 2009 12:02 PM |

A quick review of Wells Fargo’s earnings numbers this morning leaves us with as many questions as answers. 

Wells posted record earnings of $3 billion largely driven by a significant increase in refinancing activity in their mortgage origination business. Their acquisition of Wachovia in the 4th quarter supported the origination business.

Analysts on the street are questioning the depth of detail provided along with the level of reserves taken against future losses.  Highly regarded bank analyst Chris Whalen offerered that bank executives and regulators will present a rosy picture while not providing the support material to back it up.

In regard to the FASB relaxation of the mark-to-market and its impact on bank earnings, Whalen said, “accounting is a wonderful thing.”

Even after a Wells executive commented that the FASB relaxation had no impact on the banks’ earnings, Bloomberg reporters raised questions about that assertion.  Bloomberg asked, “do we believe that?”

I don’t know…do we? Without total transparency it gets very difficult to read the charts and plot the appropriate course of action.

LD

  • Mountainaires

    Kevin Phillips says the scale of the deception is vast, and, mostly, unknown. Phillips is a wise man. And, this article is well worth reading:

    The “Disaster Stage” of U.S. Financialization
    By Kevin Phillips
    April 7, 2009, 3:34PM

    http://tpmcafe.talkingpointsmemo.com/2009/04/07/the_disaster_stage_of_us_financialization/

    “… the average American knows little of the dimensions of the financial sector aggrandizement and misbehavior involved. Until this is remedied, there probably will not be enough informed, focused indignation to achieve far-reaching reform in the teeth of financial sector money and influence. Equivocation will triumph. This will not displease politicians and regulators leery of offending their contributors and backers.

    http://jessescrossroadscafe.blogspot.com/

    • Larry Doyle

      Thanks for these links as well. Power and money are very corrupting forces. Beyond shameful.

      We can only hope it gets exposed.

  • Bill

    Larry, if memory correctly serves, wasn’t there some sort of brief rally back in 08 triggered by Wells Fargo trumpeting its profitability?

  • Larry Doyle

    Bill,

    I do not recall that, but I forget what I had for dinner last night as well.

  • Mountainaires

    Martin Weiss lists Wells Fargo as one of the top banks at risk of failure. So, their profitability is quite a feat. Has the world gone mad? Don’t answer that. 😉

    http://www.marketwire.com/press-release/Weiss-Research-Inc-972696.html

  • Larry Doyle

    Mountainaires…thank you AGAIN for providing another fabulous link. I find it interesting that Weiss has Citi (no surprise) and JP but not BofA.

    He has a more than a pretty good track record…

  • Mountainaires

    Good article on the questions about Wells Fargo. The “under-reserving” argument with a graph:

    http://www.housingwire.com/2009/04/09/credit-cost-smoke-at-mirrors-at-wells-fargo/






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