Wells Fargo & Co. (NYSE: WFC): Q4 Earnings Preview 2010

Wells Fargo Company (NYSE: WFC) is scheduled to release its fourth-quarter earnings before the opening bell on Wednesday, January 19, 2011. Analysts, on average, expect the company to report earnings of 61 cents per share on revenue of $20.97 billion. In the year ago quarter, the company reported earnings of 8 cents per share on revenue of $22.70 billion.

Wells Fargo Company, through its subsidiaries, provides retail, commercial, and corporate banking services principally in the United States. The Company provides retail, commercial and corporate banking services through banking stores located in 39 states and the District of Columbia.

In the preceding third-quarter, the San Francisco, California-based company's net income was  $3.34 billion, or 60 cents a share, compared to $3.24 billion, or 56 cents a share, in the year-earlier quarter. Revenue slipped to $20.87 billion from $22.47 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 55 cents per share on revenue of $20.95 billion. 

The Wachovia merger integration remains on track and is expected to realize $5 billion of annual merger-related savings upon completion of the integration process in 2011. The acquisition of Wachovia has helped company to expand its customer base and geographic reach. 

As far as financial regulation is concerned, the company expects that the overall impact on Wells Fargo will be lower than the impact of its large-bank peers; particularly in areas such as proprietary trading, derivatives, and private equity. The company expects after-tax impact of about $275 million in the fourth quarter, not including any offsets.

Meanwhhile, billionaire investor Warren Buffett raised his holding in Wells Fargo & Co. to 336.4 million shares  at the end of September 2010 quarter, from 320.08 million shares held at the end of June quarter.

During the quarter in review, Wells Fargo & Co. agreed to pay Citigroup (NYSE: C) $100 million to settle litigation regarding Wells Fargo's acquisition of Wachovia in late 2008. Wells Fargo and Citi have been in a legal tussle over the last two years over the San Francisco-based bank's takeover of Wachovia.

Among other developments, Wells Fargo Insurance Services USA Inc., an insurance unit of  Wells Fargo & Co. announced the acquisition of Prestige Professional Plans on Wednesday. Based in Dayton, Ohio, the acquired entity is an employee benefits insurance brokerage firm. Wells Fargo closed the acquisition on December 1, 2010, but the requisites of the transaction were not disclosed.

In terms of stock performance, Wells Fargo shares have lost nearly 10 percent over the past year.

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Wells Fargo & Co. (NYSE: WFC): Q1 Earnings Preview 2010

Wells Fargo is scheduled to release its Q12010 earnings before the opening bell on Wednesday, April 21, 2010. Analysts, on average, expect the company to report earnings of $0.42 per share in the first quarter with estimates ranging from a low of $0.28 per share to a high of $0.51 per share. Revenues for the quarter are estimated to be $21.69 billion. In Q12009, the company reported earnings of $0.56 per share on revenue of $21.02 billion.

Wells Fargo & Company, through its subsidiaries, provides retail, commercial, and corporate banking services principally in the United States. The company operates through three segments: Community Banking, Wholesale Banking, and Wells Fargo Financial.

In the preceding Q12010, the San Francisco, California-based company reported net income of $394 million or $0.08 per share, compared to a loss of $3.02 billion or $0.84 per share in the prior-year quarter. Revenue rose to $22.7 billion from the previous year's revenue of $9.48 billion. Analysts, on average, expected the company to to post a loss of $0.01 per share on revenue of $21.97 billion.

Wells Fargo set aside $5.9 billion for loan losses in fourth quarter, 30% less than what it set aside a year earlier. According to industry experts, a decrease in loan loss provision suggests that the earnings will start to improve in 2010.

The bank took advantage of the financial crisis to expand its customer base and geographic reach through the acquisition of Wachovia. Wells Fargo has already begun to realize tremendous synergies from the merger. The company remains on track to achieve the $5 billion of annual run rate savings from the consolidation. It achieved approximately $2.9 billion of cost saves in 2009 and expects to achieve the remaining integration saves when integration is completed by year-end 2011.

In the fourth quarter, the company gained market share in several categories, thanks to the addition of Wachovia. The firm's market share in mortgage originations rose to 23% from 16% in 2008 and 10% in 2006. In auto lending, the company earned the status number one used auto lender as it increased its market share to 6% from 4%.

Last year was "the best year we ever had in terms of positioning the company for future growth," John Stumpf said in January. "I couldn't feel better about the opportunities ahead. The merger with Wachovia is exceeding all our expectations."

Wells Fargo also is seeking a bigger pie of the U.S. equity underwriting business currently dominated by JPMorgan Chase & Co and Goldman Sachs Group Inc. . Already, the acquisition of Wachovia Corp.'s securities unit helped Wells Fargo rank 10th in 2009 U.S. equity offerings.

The bank has announced plans to aggressively hire new financial advisers for its brokerage unit. It is reportedly planning to add about 10,000 financial advisors and brokers.

In the fourth quarter, Warren Buffet's Berkshire Hathaway Inc. (BRK-A) bought another 6.7 million of Wells Fargo's common shares. The investment firm now holds 320 million common shares, or roughly 6.7% of total outstanding shares, making it the largest shareholder. Similarly, John Paulson, too, was a big buyer of Wells Fargo stock last quarter. Through his hedge fund Paulson & Co., he bought 17.5 million in the last three months of 2009.

In terms of stock performance, Wells Fargo shares have gained nearly 19 percent since the beginning of the year.

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Wells Fargo & Co. (NYSE: WFC): Q4 Earnings Preview 2009

Wells Fargo & Company (NYSE: WFC), the nation's fourth-largest bank, is scheduled to release financial results for the fourth quarter before the market open on Wednesday, January 20, 2010. Analysts, on average, expect the company to report net loss of 2 cents per share on revenue of $21.92 billion. In the year ago quarter, the company reported a loss of 79 cents per share on revenue of $9.82 billion.

Wells Fargo & Company, through its subsidiaries, provides retail, commercial, and corporate banking services principally in the United States. The company operates through three segments: Community Banking, Wholesale Banking, and Wells Fargo Financial.

In October, the financial services provider posted higher profit for the third quarter, thanks to its Wachovia acquistion that more than doubled revenues. The San Francisco, California-based company's net income applicable to common stock was $2.64 billion, compared to $1.64 billion in the prior-year quarter. On a per share basis, earnings grew 14% to $0.56 from $0.49 in the year-earlier period. Quarterly revenue totaled $22.5 billion, up from the previous year's revenue of $10.4 billion. Analysts, on average, expected the company to report earnings of $0.33 per share on revenue of $21.63 billion.

Provision for credit loss during the quarter increased to $6.11 billion from $2.49 billion reported in the comparable quarter of the previous year. Third quarter net loan charge-offs were $5.1 billion, compared to $1.9 billion in the corresponding quarter of the previous year. The allowance for credit losses, including the reserve for unfunded commitments, totaled $24.5 billion, higher than the previous year's allowance for credit losses of $8.03 billion.

The company expects credit costs to remain elevated in the fourth quarter, given the continuing economic challenges. However, based on portfolio trends and its current economic outlook, and assuming no unexpected further deterioration in the economy, the company believes consumer loan losses will peak in the first half of 2010 then gradually decline, while commercial and commercial real estate loan losses will peak in the second half of 2010 and then gradually decline. Further, Wells Fargo expects nonperforming assets or NPAs to continue to increase in the near term, but at a slower pace as credit deterioration slows. NPAs are expected to remain elevated through 2010.

Late in December, Wells Fargo & Co. (NYSE: WFC) repaid the $25 billion it received from the government in bailout money. The company sold 489.9 million shares of common stock at $25.00 per share for a total of $12.25 billion in a common stock offering completed December 18. Net proceeds of this common stock offering and excess liquidity were used to repay the $25 billion TARP investment and accrued dividends. The company said that, by repaying the TARP investment, it will eliminate $1.25 billion in future annual preferred stock dividends.

Wells Fargo's Tier 1 Common ratio, a key measure of financial strength, is 6.2% after TARP repayment and analysts believe it will continue to rise next year. However, Wells' Tier 1 ratio is below that of the other banks that have exited TARP. The Tier 1 ratio of Bank of America (NYSE: BAC) and Citigroup (NYSE: C) after TARP repayment stand at 8.5% and 9%, respectively. By fourth quarter 2010, Bernstein analyst John McDonald believes Wells Fargo will have a Tier 1 Common ratio of 7.9%, compared to Citi at 8.7% and Bank of America at 9.2%.

Although the share issuance will likely dilute earnings per share, experts believe that the step is mildly positive for the stock. In the immediate term, the TARP repayment will reduce the fourth-quarter earnings by $2 billion due one-time hit the bank will incur from repurchasing TARP preferred stock. Offsetting those concerns, however, analysts said their worries over Wells Fargo's balance sheet, TARP-related government interference into the business, and the size of its TARP repayment have been eased.

Among other developments, Wells Fargo said in December that it has agreed to buy Prudential Financial Inc.'s (NYSE: PRU) minority stake in their retail brokerage joint venture for $4.5 billion in cash.

The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 26.71 and PEG ratio (5 yr expected) of 1.39. In terms of stock performance, Wells Fargo shares have gained nearly 21% since the beginning of the year.

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Wells Fargo & Company (NYSE: WFC): Third Quarter Earnings Preview 2009

Wells Fargo & Company (NYSE: WFC) is scheduled to report third-quarter results before the market open on Wednesday, October 21, 2009. Analysts, on average, currently expect the company to report earnings of 36 cents a share on revenue of $21.63 billion. In the year ago quarter, the company reported earnings of 49 cents per share on revenue of $10.38 billion.

Wells Fargo & Company, through its subsidiaries, provides retail, commercial, and corporate banking services principally in the United States. The company operates through three segments: Community Banking, Wholesale Banking, and Wells Fargo Financial.

Late in July, Wells Fargo reported that second quarter net income applicable to common shareholders rose to $2.58 billion or $0.57 per share from $1.75 billion or $0.53 per share in the same quarter a year ago. Net income was $3.17 billion for the quarter. Net interest income for the quarter was $11.76 billion from $6.28 billion in the year-earlier quarter. Total non-interest income was $10.74 billion, compared to $5.18 billion in the prior-year quarter. Revenue for the quarter nearly doubled to $22.51 billion from $11.46 billion in the comparable quarter a year ago. Analysts, on average expected the company to report earnings of 34 per share on revenue of $20.49 billion.

Segment-wise, revenue from Community Banking was $14.81 billion, Whole sales banking was $5.24 billions, Wealth, Brokerage and Retirement was $2.99 billion for the quarter. Legacy Wells Fargo revenue for the quarter was $13.6 billion, up 19% from last year, while Wachovia contributed 39% of consolidated revenue.

Second quarter net charge-offs surged to $4.39 billion or 2.11% of average loans. Legacy Wells Fargo net charge-offs were $3.4 billion and Wachovia net charge-offs totaled $984 million.

Early in September, the bank said that it plans to repay its $25 billion in funds from the Troubled Asset Relief Program or TARP, in the near future without diluting existing shareholders. "We will pay it back, but we're going to pay it back in a shareholder-friendly way," John Stumpf, president and chief executive officer of the company reportedly said in an interview, referring to the TARP funds. "We are now earning capital so quickly, organically; we don't want to dilute our existing shareholders."

In October 2008, the government invested more than $100 billion in the nation's nine largest banks through the TARP, with Wells Fargo getting $25 billion. Government stress tests concluded in May this year showed that Wells Fargo needed almost $14 billion in new equity capital -- among the most of any bank involved in the industry bailouts.

Investors are expected to focus on the bank's non-performing assets figure as an increase in same must also result in increase of its provision for loan losses. Holding more of its cash in reserves reduces the amount used for income generating activities such as lending. This in turn negatively impacts future earnings. The allowance for credit losses, including the reserve for unfunded commitments, totaled $23.53 billion at June 30, 2009, compared with $7.52 billion at March 31, 2009.Although it is beginning to see some moderation in the rate of growth of losses in a number of consumer portfolios, as evidenced by some stabilization in early stage delinquencies, the bank expects credit losses and nonperforming assets to increase in third quarter. Wells Fargo's nonperforming assets rose to $18.3 billion in second quarter from $12.6 billion in the first quarter. "Because of the continued weakness in the real estate market and large amount of loan modifications we've completed, nonperforming loans are staying on the books longer than in the past," said Chief Financial Officer Howard Atkins in a conference call with analysts.

In terms of stock performance, Wells Fargo shares are almost flat since the beginning of the year. On Friday, shares of the company tumbled $1.36 or 4.33% to $30.02.

Disclosure: Author doesn’t own any of the stocks discussed here.