Wells Fargo Tops View, Stays Mum on TARP Payback

Updates with mention of Bove downgrade, closing share price.

SAN FRANCISCO (TheStreet) -- Wells Fargo (BAC) offered a rebuke to skeptics by posting a third straight quarter of record earnings on Wednesday, and predicted that next year will see the end of ongoing economic stress.

But while the San Francisco-based bank maintained its track record of forecast-beating results, and reassured investors about their capital and credit concerns, the company avoided making any statements about paying back bailout funds -- something it may not be able to do any time soon.

And the stock sold off sharply late in the session after Rochedale Securities analyst Dick Bove lowered his rating on the shares to sell from neutral and took issue with the quality of the company's earnings. The stock closed down 5.1% at $28.90, just above its session-low of $28.84.

Before the opening bell, Wells Fargo posted a profit available to common shareholders of $2.7 billion, or 56 cents per share, up 61% from the year-ago period. The company touted a bigger headline profit of $3.2 billion, which likely excludes preferred-stock dividends paid to the government for a $25 billion bailout investment.

Analysts had expected Wells Fargo to post a 37-cent per share profit, on average, according to Thomson Reuters.

Wells Fargo CFO Howard Atkins called the bank a "revenue machine," as results were driven by strong growth across several key divisions. Asset management, consumer and small lending, retirement services and wealth management all gained ground, while the mortgage business remained strong. Deposits were up 11%, net interest margins grew by 6 basis points and the firm extended $169 billion in new loans last quarter.

The company also predicted a peak of credit losses in the early part of 2010 -- more bearish than Bank of America's (BAC) forecast last week of the peak having come last quarter, but still a positive sign for the economy. Although Wells' net charge offs climbed to $5.1 billion and nonperforming loans rose to 2.93% of Wells' loan book last quarter, up from $4.4 billion and 2.23% the previous period, the pace of growth has moderated throughout the year.