Chillin' out till it needs to be funded
This time the $21.2 Bln does not shine as JP Morgan has squared off a neat 25 Bln but the bank’s investors are definitely not complaining. Wells Fargo has finally crossed the $1 EPS mark more than a 6 Quarters after it started cleaning the augean stables to get a better return for its oh so dominant share in primary mortgages, where of course the expected slowdown has not hit the bank as much as other s in the industry. The Bank also reported lower NIMs much like JP Morgan down 9 bp because of cash and Net Interest income remained stable at $10.9 Bln. The Bank’s core Equity Tier 1 Basel III ratio is also a respectable 11.16% However Wells Fargo increased government insured balances with FHA mortgages and foreclosures cost it $4.3 Bln in assets up from $4.1 bln in the linked quarter
In fact the bank’s net income report of $5.7 Bln is a notch higher than JP Morgan for the better margins even as the efficiency ratio, now better by another 1.4% over June would still count as ‘nasty’ at 57 in the ordinary course of business, leaving more room for the bank to improve. The bank has already been swaying a lot more analysts in the industry with its breathtakingly nimble return on assets at 1.40% and we continue attriibuting it to their better loan performance with charge offs a low 0.32% for the bank at $664 Mln The bank has increased its EOP loans figure by 4% from June to come to $839 Bln ( we would have to really work to make it comparable to Citi and JP Morgan’s data, but there would be details at the conference)
The liquidating portfolio of Loans apparently not counting the foreclosures is still 8% of the EOP loans, down 20% as percentage of Loans in a year and as expected 70% of Mortgages are confirmed to be Primary origination Wholesale Banking was down 2% but Treasury income is up 9% from a year ago
In line with the aggressive stance adopted by the management to popularise and improve the earnings streak for the stock, the bank joined ranks with competition finallly ramping up Buybacks to $3.6 Bln. LLRs have come down to $300 mln and will come down as the increasing assets will absorb the advantages of improving conditions in credit
Fee income component seems to have reduced a bit at 48% but a detailed analysis of the last few quarters will show if there is any change indeed in fees charged by the bank as NII is stable
Both JP Morgan and Wells Fargo are now able to capitalise ont he long term from the bond exits they hit this year as the cash pile can be put to good use.