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: Still Raising the Bar on Banking

NEW YORK ( TheStreet) -- The financial sector had a phenomenal year in 2012 -- so much so that many industry experts have suggested 2013 will be weak by comparison. Too much needs to go right for a repeat performance.

Although Wells Fargo's (WFC - Get Report) recent earnings might have been for the fourth quarter of 2012, evidence suggests that it will be carried into Q1 2013 and beyond. It was a remarkable performance that netted its twelfth consecutive quarter of earnings per share growth -- an accomplishment that spans back to the height of the credit crisis.

Notably, the bank posted a 24% jump in profits while beating both top and bottom line estimates.

Wells Fargo posted earnings per share of 91 cents -- beating estimates by 2 cents. Profits totaled $5.09 billion, up from $4.11 billion year-over-year. Likewise, revenue arrived strong -- climbing 6.5% to $21.95 billion. This was also enough to top analysts' estimates of $21.30 billion.

The better-than-expected performance was helped by strong mortgage-banking income and credit. Wells, which has outperformed rivals in mortgages, has now begun to steal market share in areas such as customer deposits, which grew sequentially by $17 billion to $799.6 billion.

The bank also showed solid growth in the areas of retail brokerage, credit cards as well as commercial banking. However, net interest margin went in the opposite direction -- shedding sequentially by 10 basis points. Then again, this can be viewed as a positive since it means that customer deposits are growing at a faster rate.

Management agreed. In a recent interview with CNBC, Tim Sloan, the banks CFO described the issue this way:
We'll take that problem all day long. We love growing deposits. It grows relationships, it grows customers and it allows us to grow our fee income over time. The company's underlying results were driven by solid loan growth, improved credit quality and continued success in improving efficiency.

This was certainly an impressive showing. Wells Fargo more than made up for a Q3 performance not up to its usual standards. While most banks tend to fall in within the same category and thus appraised on similar standards and metrics, it remains evident that Wells Fargo is striving to be a cut above the rest.

It will be interesting to see how the rest of the sector performs. On Wednesday, it will be JP Morgan's (JPM - Get Report) turn to report on its Q4 followed by Citigroup (C - Get Report) on Thursday.

From an investment perspective, there will always be a premium placed on banks with above-average growth prospects that still meets certain criteria of safety. Wells Fargo continues to benefit from a business that is unburdened from unfavorable risk while consistently demonstrating solid execution and leverage.

The stock is trading at a considerable discount to long-term growth potential. Investors should expect gains of 20% as the stock should reach $40 by its third-quarter report.

At the time of publication, the author held no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.

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
C $46.28 -0.96%
JPM $63.20 -0.63%
WFC $49.98 -0.85%
AAPL $93.74 -1.15%
FB $117.58 0.73%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs