NEW YORK (
) -- As it turns out,
(WFC - Get Report)
, the Main Street competitor to Wall Street-oriented titans like
(JPM - Get Report)
, had a great trading year.
It's just not for the reasons you might think.
suggests Wells Fargo secretly engages in the type of Wall Street trading activities in esoteric and risky products normally dominated by the likes of JPMorgan,
Bank of America
(BAC - Get Report)
The truth is Wells Fargo's trading skill is far more pedestrian and profitable than one might think: buying back its own stock.
The nation's top mortgage lender may simply be effectively plying the very trading rules that its largest investor - Warren Buffett of
(BRK.A - Get Report)
- has long advocated.
After disclosing a
48 million share buyback in fourth quarter earnings
, Wells Fargo ended 2012 having repurchased roughly 120 million shares at an average price of $32.35.
As the San Francisco-based lender petitions the
to increase its dividend payout above current levels, Wells Fargo investors are likely appreciative of the bank's near $4 billion in total 2012 stock buybacks, which came, on average, roughly 8% below current stock trading levels.
Still, investors might want to see more by way of buybacks. Overall, Wells Fargo's share count didn't budge much in 2012 and buybacks basically offset share issuance for stock compensation. "[Over] the long term we like to do better than what we did this year," said CFO Tim Sloan.
Wells Fargo shares less than 1% lower on Friday to $35.10 after
record fourth quarter earnings
Using crude math and Wells Fargo's mean book value per share value of $26.56 reported through 2012, those buybacks came at an average price of roughly 121% of the firm's reported book value.
Buffett, an over 13% shareholder in Wells Fargo, may have been taking notes.
In December, the 'Oracle of Omaha'
when Berkshire Hathaway authorized a $1.2 billion buyback at a price of 120% of book value, a higher premium than the 110% mark the financial conglomerate
outlined as its threshold
at the outset of 2012.
Wells Fargo's Wall Street brethren, most notably JPMorgan, have shown less aptitude in the buyback trade, and actual trading losses have made authorizations less predictable.
After a big 2011 buyback program, JPMorgan CEO Jamie Dimon was left
apologizing to shareholders
for a double digit loss on some of those repurchases. Meanwhile, a trading loss that exceeded $6 billion in 2012 forced Dimon to retreat from a $15 billion authorization for the year. [In the third quarter, JPMorgan reinstated a multi-billion dollar buyback plan]