Friday, January 27, 2012

Wells Fargo Reports Record Q4 Earnings: Strong Financial Performance & Position

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Wells Fargo Reports Record Q4 Earnings: Strong Financial Performance & Position

Wells Fargo Summary Q4 2011 Well Fargo reported record quarterly net income of $4.11 billion and record earnings per share of $0.73. This was an overall strong financial performance, even though net revenues decreased YoY. Overall financial performance may be peaking as incremental quarterly gains are decreasing. Wells Fargo continues a conservative strategy which has maintained strong levels of capital, low credit losses, and resulted in a very good return on assets of 1.24%. The latest quarter reported continues the improvement of earnings and the balance sheet. Wells Fargo is rated highest by us of the largest USA banks (see below).

Wells Fargo Income Statement Q4 2011 Wells Fargo reported net revenues of $20.61 billion, record net income of $4.11 billion, and record earnings per share of $0.73. From the prior quarter Q3 2011, net revenues were up +4.98%, net income up +1.28%, and earnings per share up +1.39%. From the prior year Q4 2010, net revenues were down -4.14%, net income up +20.30%, and earnings per share up +19.67%, respectively. The operating and net margins decreased slightly to 29.40% and 19.93%, respectively.

Wells Fargo Balance Sheet Q4 2011 Total assets increased QoQ +0.68% and YoY +4.43% to $1.314 trillion. The capital to assets ratio (total stockholders' equity divided by total assets) increased to a strong 10.78%. Return on Assets improved to a very strong 1.24%. Gross Loans increased QoQ +1.25% and YoY +1.63% and Net Loans are an increasing share of the asset mix. The ALL/Loans ratio (Allowance for Loan Losses divided by Gross Loans) was 2.52%, should be adequate, and is the lowest since the QE December 2008.

Wells Fargo (WFC) Rating Q4 2011 At December 31, 2011, we have rated Wells Fargo an "A-", the same as at September 30, 2011. Financial position is strong and has slightly strengthened. Financial performance continues very good. Our rating weights financial position more than financial performance and emphasizes safety and soundness, not future earnings potential. Ratings range from A+ down through G-.

Wells Fargo Financial Performance by the Quarters (Charts) Below are financial performance charts for Wells Fargo after the merger of Wachovia in late 2008.

Wells Fargo Earnings per Share Current Earnings per Share of $0.73 is +1.39% QoQ, +19.67% YoY, another record high, and have increased for 8 consecutive quarters. The chart average EPS is $0.57.


Wells Fargo Net Revenues, Operating Income, Net Income Consolidated revenues are reported net of interest expense as Net Revenues. Current Net Revenues of $20.61 are +4.98% QoQ, -4.14% YoY, and a 4-quarter high. Current Operating Income of $6.06 billion is a 3-quarter low. Current Net Income of $4.11 billion is +1.28% QoQ, +20.30% YoY, the 7th consecutive quarterly increase, and another all-time high. The chart averages for NR, OI, and NI are $21.24 billion, $5.06 billion, and $3.38 billion, respectively.


Wells Fargo Operating Margin and Net Margin Current Operating Margin of 29.40% is a 3-quarter low. Current Net Margin of 19.93% is a 2-quarter low. The chart averages for OM and NM are 23.96% and 16.13%, respectively.


Wells Fargo Capital to Assets Ratio and Tier 1 Capital Ratio The Tier 1 Capital Ratio of 11.33%, Capital Ratio of 10.78%, and Tier 1 Common Ratio of 9.46% are adequate. All 3 ratios increased in the current quarter. The chart averages for T1 Capital, Capital, and T1 Common Ratios are 10.84%, 10.27%, and 8.27%, respectively.


Wells Fargo Return on Assets Current Return on Assets of 1.24% is a multi-year high and well above the banking benchmark of +1.00%. The chart average ROA is 1.06%.


Wells Fargo Income Statement Components Current NonInterest Expense, operating expenses, of $12.51 billion is a 3-quarter high. Current Net Interest Income of $10.89 billion is a 4-quarter high. Current NonInterest Revenue of $9.71 billion is a 4-quarter high. Current Provision for Credit Losses of $2.04 billion is a 3-quarter high. The chart averages for NIE, NII, NIR, and PCL are $12.41 billion, $11.15 billion, $10.08 billion, and $3.78 billion, respectively.


Wells Fargo Asset Mix Higher yielding Net Loans of 57.10% increased, offset by a corresponding decrease in lower yielding Cash and Investment Securities of 27.72%. The other categories (Mortgages and Loans for SaleNonEarning Assets, and Mortgage Servicing Rights) are relativity stable and comprise the remaining 15.17% of total assets.


Wells Fargo Operating Expense Ratio The current Operating Expense Ratio of 56.62% is a 3-quarter. The chart average OER is 53.39%.


Tuesday, January 17, 2012 WELLS FARGO REPORTS RECORD QUARTERLY AND FULL YEAR NET INCOME Q4 Net Income of $4.1 billion; Q4 Revenue of $20.6 billion SAN FRANCISCO – Wells Fargo & Company (NYSE: WFC) reported record net income of $4.1 billion, or $0.73 per diluted common share, for fourth quarter 2011, compared with $3.4 billion, or $0.61 per share, for fourth quarter 2010, and $4.1 billion, or $0.72 per share, for third quarter 2011. Full year 2011 Wells Fargo net income was $15.9 billion, or $2.82 per share, up 28 percent from 2010.

“I’m extremely pleased with Wells Fargo’s performance in 2011 – including strong deposit and loan growth, record cross-sell and record earnings,” said Chairman and CEO John Stumpf. “We achieved these results while completing the conversion of Wachovia’s retail banking stores – the largest such conversion in banking history – and now all of our 6,239 retail banking stores are on a single platform serving customers coast to coast. At the time of the merger, we said the integration of Wachovia would take three years and we are right on track. I couldn’t be prouder of how our two companies have come together as one, thanks to the important and tireless work of our more than 260,000 team members.

“In 2012, we are focused on Wells Fargo’s many opportunities, including continuing to provide our customers with award winning service, welcoming new customers as we grow market share throughout our many businesses and geographies, achieving efficiency improvements across the company and returning even more capital to our shareholders.” “The fourth quarter of 2011 was a very strong quarter for Wells Fargo, with record earnings, solid linked quarter growth in loans, deposits and capital, and continued strong credit quality,” said Chief Financial Officer Tim Sloan. “Revenue was up 5 percent from the third quarter despite a full quarter’s impact of the new debit interchange rules. As expected, expenses were higher in the quarter and we are maintaining our target of $11 billion in noninterest expense in the fourth quarter of 2012.”

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