This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Wells Pick-A-Pay Plan Poses Risk

Stocks in this article: WFC

SAN FRANCISCO ( TheStreet) -- Wells Fargo (WFC) has a funny way of easing investor concerns.

After three quarters of astounding, Street-beating bottom lines, Wells' shares are still saddled with credit concerns. Even last quarter, while TARP-laden peers like Bank of America (BAC) and Citigroup (C) reported losses, driven down by consumers and businesses finking on debts, Wells reported a $3.2 billion profit -- in the league of so-called "healthier" competitors like JPMorgan Chase (JPM) and Goldman Sachs (GS).

"We want to ask a rhetorical question here -- why is it that when companies like Goldman Sachs have huge trading quarters, the Street cheers that occurrence and bids up the stock--but when Wells Fargo has several (in a row) large mortgage banking quarters, the Street's reaction is "Not sustainable" and the stock gets taken down?" analyst Nancy Bush wrote in a note reiterating her buy rating on Tuesday.

But scrutinizing the numbers more closely gave room for the bears to settle in.

Wells' nonperforming loan ratio has rocketed to 2.61% from just 1.25% just six months ago. The firm has reassured investors that a credit-loss peak is at hand; that Wachovia's bad debt was written down far enough at the time of its acquisition to no longer be a concern; that "not all NPAs result in a loss"; that its loan workout program has yielded positive results; and that Wachovia's most toxic book of loans -- the "Pick-A-Pay" portfolio -- is doing better than initially expected.

On Tuesday it became clear why.

The bank has been allowing homeowners to make "interest only" mortgage payments to stay current, and stay in their residences. They are still tens if not hundreds of thousands of dollars "underwater" -- meaning their homes are worth much less than what they owe -- but Wells believes this isn't anything to worry about.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs