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's Earnings Troubles Are Hidden In Plain Sight: Street Whispers

As The Atlantic correctly points out, Wells Fargo has recently suffered accounting losses as its MSR valuation rises.

In the third quarter, the bank added $462 million to its repurchase reserve. KBW analyst Fred Cannon estimated, in a note reacting to earnings, that a similar reserve for Wells Fargo's risk hedging portfolio put overall reserve increases at $729 million for the third quarter.

Still, Wells Fargo highlights that its 7.32% delinquency and foreclosure rate is a best of breed in the mortgage industry, and is roughly 4% lower than competitors. In contrast to peers like Bank of America, Wells Fargo, despite being the nation's leading mortgage underwriter, has seen below average putback claims.

If a case for Wells Fargo's prudent underwriting sounds familiar, that's likely because Warren Buffett has long highlighted the bank's lending standards as reason it's among Berkshire Hathaway's top holdings. Contrary to what The Atlantic alludes, Buffett's likely very capable of reading Wells Fargo's quarterly and annual filings to square out the bank's overall mortgage underwriting risk.

And that is the point.

Modern banking is inherently complex and it does require a thorough reading of financial statements and earnings transcripts, two investing basics Buffett has long highlighted. Complex earnings and the requirement of careful analysis, however, does not prove an intent to mislead or trick investors.

Meanwhile, in the wake of Wells Fargo's muddled earnings picture TheStreet has questioned whether Buffett and other Wells Fargo investors may get blindsided by Fed-fueled interest rate risks that are in plain sight.

-- Written by Antoine Gara in New York
2 of 2

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
BRK.A $217,354.00 0.00%
BRK.B $144.83 0.00%
BAC $14.24 -0.84%
WFC $50.00 0.00%
AAPL $94.68 -0.53%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs