Wells Fargo Highlights Bank Strengths, Revenue Slightly Disappoints

Wells Fargo & Company (NYSE: WFC) posted a record net income of $4.9 billion for its third quarter. This is a 27% gain, and earnings per share of was up 29% to $0.88. Revenue was down less than 1% at $21.2 billion. Thomson Reuters was looking for $0.87 per share and $21.47 billion in revenue.

The money-center bank took a pretax preprovision profit of $9.1 billion, up 9% from the prior quarter. Its noninterest expense was $12.1 billion, down $285 million from the prior quarter. Some ratios were as follows:

• 57.1% efficiency ratio
• Return on average assets were 1.45%, up 4 basis points from the prior quarter
• Return on equity was 13.38%, up 52 basis points from the prior quarter
• Total average core checking and savings deposits were up $16.9 billion from the prior quarter
• Total loans rose by $7.34 billion from the prior quarter to $782.6 billion
• Tier 1 common equity under Basel I increased $4.1 billion to $105.8 billion
• Tier 1 common equity ratio of 10.06% under Basel I
• Estimated Tier 1 common equity ratio of 8.02% under current Basel III capital proposals

The bank also repurchased approximately 17 million shares of common stock in third quarter and an additional estimated 9 million shares through a forward repurchase transaction expected to settle in fourth quarter 2012. Wells Fargo said that its net charge-offs of $2.4 billion were 1.21% annualized of its average loans, but this includes $567 million of net charge-offs from the implementation of newly issued regulatory guidance.

Wells Fargo reported a book value per common share of $27.10, up 12% from September 2011’s book value of $24.13 per common share. Wells Fargo shares are down 2.8% at $34.21 against a 52-week range of $23.19 to $36.60.

JON C. OGG