This Day On The Street
Continue to site
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

Wells Fargo Gets a Housing Bump

The question for Wells Fargo and the overall banking sector headed into the third quarter was whether a housing pickup will be enough of offset negatives like falling interest rate-based earnings.

On the heels of the Federal Reserve's September plan to begin a third easing effort - known as QE3 -- by buying $40 billion in mortgage bonds a month for the foreseeable future and keeping interest rates near zero through mid-2015, followers of the banking sector warned that the program could be a big hit to 2013 bank sector earnings

In total, the bank's revenue rose 8.1% from a year earlier and held steady compared with the second quarter. Mortgage banking income rose to $2.81 billion, up 53% from 2011 levels, but posted a $86 million drop from the prior quarter

Better than expected earnings per share and revenue numbers in the third quarter signal that, for now, Wells Fargo continues to outperform expectations. However, headed into 2013, falling interest earnings are a worrying sign.

Deutsche Bank analyst Matt O'Connor downgraded Wells Fargo and PNC Financial (PNC), another fast growing lender, from 'Buy' to 'Hold' on concerns over year-to-date stock gains, interest rate pressures and whether the respective banks can maintain strong mortgage lending growth.

"We believe WFC is best positioned for mortgage activity remaining stronger than expected given its market share of about one-third... However, both of these are well known and we believe already reflected in the stock," writes O'Connor. The analyst recommends Goldman Sachs (GS) and Fifth Third Bank (FITB) as banks that may outperform in quarterly earnings.

Some questioned whether strong overall third quarter housing and loan origination data may outweigh concerns of an earnings stall at Wells Fargo or other lenders.

KBW analysts led by Fred Cannon expected Wells Fargo to report flat overall sequential EPS growth and a slowing of mortgage origination from the second quarter.

"[Flat] earnings in a difficult interest rate environment should be a good quarter for the company especially relative to other spread-dependent banks," wrote Cannon, who gives Wells Fargo shares an outperform rating. Overall, revenue at Wells Fargo held steady, while earnings per share rose by 6 cents.
2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
JPM $61.45 0.34%
WFC $48.99 0.06%
AAPL $93.07 -0.18%
FB $117.81 0.00%
GOOG $703.46 0.29%


Chart of I:DJI
DOW 17,667.39 +6.68 0.04%
S&P 500 2,049.06 -1.57 -0.08%
NASDAQ 4,707.9250 -9.1690 -0.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs