(By Salman - iStockAnalyst Writer)Wells Fargo & Co. (NYSE:
WFC: 25.83, 0.83) is scheduled to announce its second quarter 2009 earnings on Wednesday, July 22, 2009, at 8 a.m. ET. Analysts currently expect the bank to report earnings of 32 cents per share on $20.3 billion in revenue. A year ago, Wells Fargo reported 53 cents a share on revenue of $11.5 billion.
Wells Fargo & Company, through its subsidiaries, provides retail, commercial, and corporate banking services principally in the United States. The company operates through three segments: Community Banking, Wholesale Banking, and Wells Fargo Financial.So far, Wells Fargo's bottom line has held up better than expected. First quarter net income of Wells Fargo, excluding payment of preferred stock dividend, surged to $3.05 billion from $2.00 billion in the same quarter a year ago. Earnings on a per share basis, however, dropped to $0.56 from $0.60, due to an increase in average common share outstanding. The San Francisco-based bank earlier this year was told by regulators after government stress tests that it needed to boost Tier 1 capital levels by $13.7 billion. The company had received $25 billion and has yet to submit an application for the repayment of same. Thus, the firm is expected to continue facing bailout-related government restrictions on executive pay, dividends and other things. In May, the bank raised $8.6 billion by selling common stock.
The bank came under pressure after it acquired Wachovia which was in danger of collapse due to bad mortgages. Credit losses at Wachovia may continue to hurt the bank in coming days. Presently, many of troubled assets are in special purpose vehicles, for which banks don't have to account on their books. According to industry experts, Wachovia's exposure to problem loans is significant.Still, the bank may report upbeat earnings given the strong mortgage activity. Recently, Wells Fargo Chief Executive John Stumpf said the $25 billion of subprime loans on the bank's balance sheet and made at its Wells Fargo Financial unit are performing very, very well - well above the industry average.
The San Francisco bank has combined its existing securities division with the larger practice of Wachovia Corp. "Clearly one of the great benefits of the Wachovia merger was the strong investment banking and capital markets platform that we gained," John Stumpf, chief executive officer of Wells Fargo, said in a statement. "We plan to build on those strengths to grow and invest in the business." When Wells Fargo acquired Wachovia last year, the company said it planned to sell off or shut down Wachovia's riskier, investment banking operations, which were considered incompatible with Wells Fargo's typically conservative nature.
Shares of the company are currently trading at roughly 14 times consensus 2010 EPS estimates. In terms of stock performance, Wells Fargo shares have lost 16% since the beginning of the year. On Friday, shares of the company fell 5 cents or 0.19% to close at $25.05 in regular trade.
Disclosure: Author doesn’t own any of the stocks mentioned here.
Bilibala comments:
I really don't understand after JP Morgan and Bank of American report earnings better than expectation. Analysts still think Wells Fargo will only make 2q09 EPS $0.32. To me, unless loan provision rise dramatically, my conservative 2q09 EPS guess is $0.56.
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