April 9 (Bloomberg) -- Wells Fargo & Co., the second- biggest U.S. home lender, reported a record first-quarter profit that beat the most optimistic Wall Street estimates, sparking a rally in bank shares on speculation that the industry’s slump has ended.It seems counter-intuitive than a bank so thoroughly dependent on the home mortgage business could see a big boost in profits at a time like this. On other blogs there are accusations that WFC was cooking the books. That sort of thing happens all the time as losses are shifted this way or that in time, but I couldn't figure out why they would do it now.
Net income rose 50 percent to about $3 billion from $2 billion a year earlier, the San Francisco-based lender said today in a preliminary earnings report. Profit of about 55 cents a share was more than double the average estimate of analysts surveyed by Bloomberg.
Then I recalled how the CEO of Wells Fargo had been yelling about how restrictive the government was being because they had accepted TARP funds. He claimed that WFC had never needed those funds and that the government was changing the rules after the funds had been accepted. My bet is that WFC is trying to attract bond investors so they can pay back the TARP money and get away from government control as fast as possible.
It's just a thought.
KT, if you recall, last October, Wells was the only one of the Big 9 that said "No, thanks" to bailout money. Of course, they weren't going to leave that meeting with Bernanke, Paulson and Geithner without taking it.
ReplyDeleteThey were on solid financial footing back then but word couldn't get out that a private financial entity was behaving in a responsible manner. You just can't have that sort of information floating around out there in the midst of a crisis