Wells Fargo reported 0.55 EPS for Q1. On the one hand results are very strong, illustrating the earnings power of the franchise. Company's net charge-offs are up to 3.3B from 2.8B in last quarter, while they also added 1.3B to reserve, but the pre-provision earnings at 9B allow them to easily absorb those losses. Hoorah, all bank shares rallying. Two points of caution on the results though: a) NCOs are lowered as Wachovia's impaired 'Pick-a-Pay' loans are not in the charge-off number - they were written down on acquisition, and until losses on them hit the written-off amount, there're no new write-offs on them; b) WFC CEO Kovacevich has recently repeatedly ranted against the stress tests calling them 'asinine'. That makes you question whether WFC needs to raise new capital (their Tier 1 at 7.9% is the lowest among all major banks after all), in which case pre-announcing the earnings will give you a nice share price bump, that would allow to tap existing shareholders for capital with less dilution. We'll wait a couple of weeks to see whether this prediction will pan out...
And more on banks: NYTimes article says after conducting stress tests, officials say that "the banking industry seems to be in better shape than many people think"
China is buying more cars than U.S. for the first time. Long live Wen Jiabao.
No comments:
Post a Comment