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Thursday, October 22, 2009
Wells Fargo fell 5% after 'record' profits; analysts skeptical

Wells Fargo & Co., which became Philadelphia's largest bank when it bought Wachovia Corp. last year, reported higher-than-expected profit yesterday. So why did the stock fall 5 percent?

The bank's reported profit "seems to be due to two factors," reports veteran bank analyst Richard X. Bove, now with Rochdale Securities: huge earnings from its home-mortgage servicing and investment business - which are notoriously "volatile" - and lower taxes.

"It is an unsustainable profit," Bove told clients in a report. "Loan losses seem to be accelerating." The bank is lending less to business and home buyers in the recession. It's buying government-backed bonds instead.

He doesn't see Wells' lending profits improving for another year. Bove says Wells is doing a "superb" job integrating Wachovia into its nationwide network. Too bad it brought along a "cancerous loan portfolio," he added.

Bove recommended investors sell the stock; and some did. - From today's PhillyDeals column.

Posted by Joseph N. DiStefano @ 7:05 AM  Permalink | Post a comment
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About Joseph N. DiStefano
Joseph N. DiStefano writes this blog to feed his PhillyDeals column, which is printed in the business pages of The Philadelphia Inquirer every Sunday, Tuesday, Wednesday, Thursday and Friday. Joe has worked at the Inquirer, mostly, since 1988. He has also written for Bloomberg and Gannett, authored the book Comcasted, majored in economics at Penn, and fathered six children. Reach Joe at 215-854-5194 and JoeD@phillynews.com

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