Wednesday, April 20, 2011

Wells Fargo Reports Record Q1 Earnings! (Financial Charts, Review) *Net income $3.8B, EPS $0.67* WFC

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Wells Fargo reported Q1 2011 financial results on April 20, 2011
Charts and commentary have been updated for Wells Fargo Q1 March 2011 financial results *

Wells Fargo Reports Record Q1 Earnings!

Wells Fargo Summary Q1 2011 Well Fargo reported record Q1 2011 earnings of $3.8B and strong financial performance. Wells Fargo continues a conservative strategy which has maintained adequate levels of capital, decreased credit losses, and resulted in a very good return on assets of 1.1%. The latest quarter reported, Q1 2011, continues the improvement of earnings and the balance sheet.

Wells Fargo Income Statement Q1 2011 Wells Fargo reported net revenues of $20.3B, net income of $3.8B, and earnings per share of $0.67. From the prior quarter Q4 2010, net revenues were down -5.42%, net income up +10.11%, and earnings per share up +9.84%. From the prior year Q1 2010, net revenues were down -5.22%, net income up +47.59%, and earnings per share up +48.89%, respectively. The operating and net margins increased to multi-year highs of 26.49% and 18.49%, respectively. The increase in net income was mostly attributable to the ongoing decrease in provision for credit losses.

Wells Fargo Balance Sheet Q1 2011 Total assets decreased slightly QoQ -1.07% to $1.25 trillion. The capital to assets ratio (total stockholders' equity divided by total assets) increased to a very good 10.84%. Tier 1 capital was 11.50%, which is adequate and the highest since the Wachovia merger. Gross Loans decreased QoQ -0.81%. The ALL/Loans ratio (Allowance for Loan Losses divided by Gross Loans) was 2.93%, should be adequate, and is the lowest since June 2009.

Wells Fargo Financial Performance by the Quarters (Charts)

Below are financial performance charts for Wells Fargo beginning with the March 2009 quarter, after the merger of Wachovia in late 2008.

Wells Fargo Earnings per Share (Chart) Below is a chart of quarterly earnings per diluted share. Current earnings per share reached a record high of $0.67 and have increased for 5 consecutive quarters.

Wells Fargo Net Revenues, Operating Income, Net Income (Chart) Below is a chart of quarterly net revenues, operating income, and net income. Consolidated revenues are reported net of interest expense. Current Net Revenues of $20.3B dropped below the Q4 December 2010 4-quarter high of $21.49B. Current Operating Income of $5.4B is an all-time high. Current Net Income of $3.76B is also an all-time high.

Wells Fargo Operating Margin and Net Margin (Chart) Below is a chart of quarterly operating margin and net margin. Both the operating margin and net margin are at multi-year, if not all-time, highs of 26.49% and 18.49%, respectively.

Wells Fargo Capital to Assets Ratio and Tier 1 Capital Ratio (Chart) Below is a chart of the capital to assets ratio and Tier 1 capital ratio. The capital to assets ratio is the stockholders' equity to total assets ratio. The Tier 1 capital ratio is a financial regulatory ratio and measurement. The current capital to assets ratio reached multi-year, if not all-time, high of 10.84%. The Tier 1 capital ratio has also reached a multi-year, if not all-time, high of 11.50%. Both are adequate.

Wells Fargo Return on Assets (Chart) Below is a chart of annual return on average assets per quarter. The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. Current Return on Assets is at a multi-year high of 1.10%. This is very good considering the conservative strategy discussed at the beginning of this post. An ROA of 1% is considered a banking benchmark.

Wells Fargo Income Statement Components (Chart) Below is a chart of the major income statement components: NonInterest Revenue, Net Interest Income, Provision for Credit Losses, and NonInterest Expense. Current NonInterest Revenue of $9.7B is an 8-quarter low. Current Net Interest Income of $10.7B is a multi-year low. Current Provision for Credit Losses of $2.2B is also a multi-year low. Current NonInterest Expense, operating expenses, of $12.7B is the lowest in 3 quarters.

Wells Fargo Asset Mix (Chart) Below is a chart of quarterly asset mix, the major asset categories as a percentage of total assets: Cash & Securities, Mortgages & Loans for Sale, Net Loans (Gross Loans less Allowance for Loan Losses), Mortgage Servicing Rights, and NonEarning Assets (Premises & Equipment, Goodwill, and Other Assets). Wells Fargo reported $1.24 trillion in total assets at March 31, 2011 so percentage points add up fast. Higher yielding Net Loans of 58.58% are down from a peak of 63.87% in March 2009. There has been a corresponding increase in lower yielding Cash and Investment Securities. These are at a multi-year high of 26.98%. The other categories (Mortgages and Loans for SaleMortgage Servicing Rights, and NonEarning Assets) are relativity stable and comprise the remaining 14.44% of total assets.

Wells Fargo Operating Expense Ratio (Chart) Below is a chart of the operating expense ratio (NonInterest Expense divided by Total Revenues which are NonInterest Income and Interest Income). Current operating expenses of 57.49% are a multi-year high. This is a negative development. Even though NonInterest Expense decreased in the current Q1 2011, Total Revenues decreased more resulting in the higher operating expense ratio. An unreasonable share of each dollar of revenues is being spent on operating expenses. Ultimately a continuation of this uptrend will decrease profitability and already has.

Wednesday, April 20, 2011

SAN FRANCISCO - Wells Fargo & Company (NYSE: WFC) reported record net income of $3.8 billion, or $0.67 per diluted common share, for first quarter 2011, up from $2.5 billion, or $0.45 per share, for first quarter 2010.

“Our strong first quarter results reflected positive trends in our business fundamentals as credit quality improved, capital ratios increased and cross-selling reached new highs,” said Chairman and CEO John Stumpf. “As the economy continued an uneven recovery, our business customers increased borrowing and utilization of credit lines – a hopeful sign that businesses are once again investing for growth. Consumers continue to be hesitant to borrow, yet our robust deposit growth reflects the strong loyalty and market share we enjoy among customers. We also marked an historic return of the Wells Fargo name to the New York market as we celebrated our 159th anniversary and converted banking stores in Connecticut, Delaware, New Jersey and New York during the quarter. Our Pennsylvania banking stores were converted successfully this past weekend and we expect to convert all remaining Wachovia stores by the end of this year.

“We were extremely pleased to return additional capital to our shareholders in the first quarter with an increased common stock dividend. This action, coupled with the reinstatement of our common stock repurchase program and the calling of certain high-cost trust preferred securities, reflects the continued strength of our capital position. The diversity ofWells Fargo's business lines enables us to better serve all our customers' financial needs and enhances the stability and strength of our earnings –which in turn provides the foundation that supports us in doing the right thing for our customers and our shareholders every day, for the long term. Our focus is on improving our efficiency, investing wisely, making every good loan we can, helping customers emerge from the economic downturn, and building an ever-stronger capital base.”

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.2 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, the Internet ( and, and other distribution channels across North America and internationally. With approximately 280,000 team members, Wells Fargo serves one in three households in America.Wells Fargo & Company was ranked No. 19 on Fortune’s 2009 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

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