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TheStreet Open House

Wells Fargo Earnings Show Why You Should Consider This Bank’s Stock

NEW YORK (TheStreet) -- It used to be said that good commercial banks were boring.

Well, among the largest commercial banks in the U.S., Wells Fargo (WFC - Get Report) is by far the most boring of the lot. And, that's a good thing.

Wells Fargo Friday reported net income of $1.01 per share vs. 98 cents per share a year earlier. Profits were up year over year for the 16th quarter in a row, based on data from FactSet. Earnings matched analysts' expectations, but investors may have been hoping for more, as Wells Fargo shares sold off Friday morning and were recently changing hands at $51.25, down 56 cents, or 1.1%.

Wells Fargo Earnings Show Positive Housing Market Activity

How Will Wells Fargo Stock React to Its Just-Reported Results?

Return on shareholder's equity rose to 14.1% for the quarter, continuing the increases in this measure that began from a near-term low achieved in 2010. This is an outstanding performance relative to competitors given the economic and regulatory climate that exists in the banking industry.

Overall, the net interest margin earned by the bank dropped to 3.15% from 3.40% a year earlier and 3.20% in the previous quarter. Current low interest rates are just killing the basic business of banking. This is a hurdle that all banks are facing, and Wells' results elsewhere indicate what an excellent job its management is doing in general.

The gains Wells Fargo has made on the expense side seem to have been exhausted as costs remained relatively constant from a year ago. However, the bank was able to take lower provisions for loan losses. Credit loss provisions this year, at $217 million, were only one-third of the $652 million logged one year ago. This quarter's number was also down from the $325 million taken last quarter. Credit quality remains a strong point at the bank.

It is so refreshing to write about a large commercial bank where the focus is on the actual banking business, not the investment banking business. Wells Fargo does have an investment banking business, but it is not as large as those of the other major banking institutions and Wells' overall results depends on it much less.

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