The Banking and Strategy Initiative

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Bank Results Season: Wells Fargo Q1 2012 repeats Q4 performance – The pretender looks f-ugly in comparison? | Banking Insight

The bank moved up its earnings report a week to enable like to like comparison with peers like JP Morgan as it reported a 75 cents Earnings per share for a 3% sequential improvement oto $4.2  bln in Post Tax profits on $1 Bln higher revenues of $21.6 bln Wells however compares with a Pre provision profit of $8.6bln  and a ROE equal to the mean JP Morgan machine at 12%. The bank’s PTPP prpofit is not comparable to JPM but one off items including litigation expenses compare the Profit before one off items at the same $4.2 bln even with $6.7 bln for JP Morgan according to our perusal of their balance sheet and Net income data supplements.

The bank boasts of a 50% NII component in the $21.6 bln revenues and including 17% Fees from Commissions , a $10 bln even in Other income that also includes 24% of the $10 bln from mortgage fees and other fees on a Loan portfolio spanning $766 bln The bank’s Basel 3 computation though subject to a lesser trading book hit or a SIFI surcharge with nointernational component except BNP’s US Energy business that it bought itself. the Basel 3 computation of its Tier I equity is a jaw dropping 7.88% with common equity of $99 bln comparing to $128 bln at big brother JP Morgan

The bank’s NIM calculates to 3.91% and $458 mln addition from trading gains. JP Morgan Fixed income trading revenue alone is $4.5 bln and Equities more than $1.5 bln ( in Principal Trading more than 50%) Also its $120 bln in mortgages in the quarter count for something as the no. of applications jumped 84% in Q1. That number firmly gives Wells Fargo the impetus to move in on its advantage with the loan book evenly split $340 bln in retail and $320 bln in commercial lending. Most of the coming tide in foreclosures will hit the balance sheet in 2013.

However, Stumpf may have to steer clear of allies like Egan Jones who have proceeded to downgrade JP Morgan as dealbook mentions Wells Fargo enjoys a 2.6% cost of borrowing compared to Jamie Dimon’s 2.71% while the FT and others repurpose their writing guns to boost the coming mortgage /housing recovery on results day

Stumpf took time in his conference to point to the rising gap between rentals and loan EMIs , nearly $300 as the change from rentals to home ownership is yet to happen. Dimon took time to note that consumer households are back to their Debt / income ratio of 20 years ago in the weak jobs economy

 

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