Analyst: Wells Fargo profits ‘unsustainable’

The Wells Fargo stagecoach hit a bump Wednesday afternoon, hours after announcing a record profit.

The bank’s stock dragged down the market after an influential and typically bullish analyst described its profits as “unsustainable.”

Richard Bove of Rochdale Securities also downgraded his rating on Wells Fargo from “neutral” to “sell.” The improvement in Wells Fargo’s mortgage business stemmed from a hedging profit and lower taxes.

The “most disturbing” part is Wells Fargo’s loan losses appear to be accelerating, Bove said. The number of assets no longer collecting interest climbed 28 percent to $23.5 billion, Bloomberg reported.

You can also learn about all our free newsletter options.

Comments (4)

  1. Submitted by Richard Schulze on 10/22/2009 - 08:40 pm.

    The game is out of hand. Regulatory arbitrage on what assets should be marked to myth vs. marked to market.

    Next I’ll discuss the solvency issues (not as easy to fix). (lite snark)

  2. Submitted by Joe Johnson on 10/23/2009 - 05:12 am.

    Richard did you read the BB report. The FAS 157 MTM created a loss for Wells on their MSR’s, the firms hedging activity created the gain. The analysis should note that Wells and JPM know their servicing rights business well enough to properly hedge it. The gains were not from core business activity but would you rather own BofA?

  3. Submitted by Richard Schulze on 10/23/2009 - 08:42 am.

    WFC required about $15 billion in new capital as a result of regulators’ stress test. JPMorgan Chase & Co. didn’t need to raise its capital. Citi needed $10 billion.

    Wells needed $15B and Citi $10B. Does it make sense?

    WFC credit losses in Golden West /WB legacy, CRE, HELOCs, CC… with $22B in GOODWILL on their balance sheet and $15B is enough to cover worst case ? LMFAO!

    I am in awe of the power of printing + leveraging.

  4. Submitted by Richard Schulze on 10/23/2009 - 09:08 am.

    Joe, I am assuming that your question about Bofa was rhetorical in nature.

    Bofa set aside $11.7 billion during the quarter for credit losses, $1.7 billion less than in the second quarter but $5.3 billion more than in the 2008 third quarter.

    Credit-loss provisions swelled 81%, while the net charge-off rate was up at 4.13% from 1.84% a year earlier and 3.64% in the second quarter. Total nonperforming assets rose to 3.72% from 1.45% in the prior year and 3.31% last quarter.
    The confessional is still open.(lite snark)

    Being TBTF definitely has its perks.
    Absent the Government’s support, both BAC and GE would be bankrupt.

    Any further questions?

Leave a Reply