Wells Fargo (WFC) surprised the street this morning by announcing that their first quarter earnings should be about $0.55 per share, which is more than double the Reuters estimate for $0.23 per share. This would amount to record earnings exceeding $3 billion for the quarter. Wells Fargo is the second biggest mortgage lender in the U.S., which is where the surprising strength in earnings appears to be originating.
In a statement this morning, Chief Financial Officer Howard Atkins said, “Business momentum in the quarter reflected strength in our traditional banking businesses, strong capital markets activities, and exceptionally strong mortgage banking results.”
The big bank also appears to be benefiting from the recent acquisition of Wachovia, where results were exceeding expectations.
In a Bloomberg interview, CFO Atkins also said that while the economy is not out of the woods yet, Wells is feeling that we're a lot closer to bottom. Atkins added that the company is seeing "lots of activity" in lower-end California home loans.
Why do we care? In short, because the banks have been at the center of the financial crisis and if Wells Fargo is joining Bank of America (BAC), Citigroup (C), and JP Morgan Chase (JPM) on the list of big banks making money, it would appear that we have seen the worst in the crisis and the bear market.
The news pushed S&P futures to the high of the day in the pre-market and shares of WFC have jumped up $4.05 to $18.96 – a gain of +27.3% in the first fifteen minutes of trading.
Wells Fargo
Wells Fargo
S&P 500
S&P 500
