Wells' Stumpf Mum on CFO Departure

NEW YORK ( TheStreet)-- Wells Fargo ( WFC) CEO John Stumpf wouldn't answer questions Wednesday on the departure of Howard Atkins, the bank's former financial chief, preferring instead to focus on the bank's dividend and buyback.

"That is so yesterday. We have a terrific CFO; we are going forward and we are looking to the future," said Stumpf in the bank's conference call Wednesday.

Stumpf said the bank's board approved a second-quarter dividend of 12 cents a share, the same amount as the first quarter, and will soon begin to buy back up to 200 million shares.

"This month the bank will start to buy back shares," said Stumpf. "It is going to be a function of how we view the stock price more than anything."

Shares of Wells Fargo were falling $1.35 to $28.72 in early afternoon trading Wednesday.
Wells Fargo CEO John Stumpf

Wells Fargo reported first-quarter net income of $3.8 billion, or 67 cents a share, on revenue of $20.3 billion. Analysts surveyed by Thomson Reuters predicted the bank would report earnings of 66 cents a share on sales of $21.2 billion.

"Weaker revenues stemming from mortgage banking were essentially offset by lower loan loss provisioning, resulting in the reported EPS being pretty much in line with consensus and our estimate. However, investors are likely to focus (rightfully so, in our view) on the revenue miss," said Stifel Nicolaus analyst Christopher Mutascio in a note.

Mortgage banking income fell $741 million from the fourth quarter of 2010 to $2.02 billion. As the business slowed management laid off 4,500 employees. Management also said costs to improve its foreclosure practices as discussed the foreclosure settlement were included in the quarter.

"We have already started making operational changes and incurring some of the costs from the consent order," said Wells Fargo Chief Financial Officer Tim Sloan, Atkins' replacement.

Wells Fargo saw an improvement in credit quality, which enabled the company to release $1 billion in reserves during the first quarter, boosting earnings.

"We would expect more releases absent significant deterioration in the economy and future reductions in the allowance for loan losses," said Sloan.

Sandler O'Neill analyst R. Scott Siefers, in a note, said credit costs were on track.

"WFC beat our estimate on a combination of lower-than-expected credit costs and better expenses. Asset quality looked pretty good across the board, and we appreciate the focus on costs."

Wells Fargo saw deposits rise $2 billion from the fourth quarter and $37.7 billion from the first quarter of 2010, partly due to the continued integration of Wachovia. Merger expenses in the first quarter were $440 million, down from $534 million in the fourth quarter of 2010, said Sloan.

"We want to complete the Wachovia merger in 2012 and that is doing extremely well," said Stumpf. "This was a good bet or a bad bet and with the improvement in credit quality, we think we did a good job on that front and we sure like the results. We are on schedule with the integration and we are on budget."

The increase in deposits prompted Wells Fargo to reexamine the impact that the Durbin Amendment, which places a cap on debit card fees, will have on the bank's earnings. The bank increased the Durbin Amendment's impact to $325 million after tax from $250 million.

Lawmakers should take the necessary time to weigh the impact," said Stumpf. "Banks should be fairly compensated for the services they provide consumers. Government price controls should be considered, especially where they make no sense for consumers."

--Written by Maria Woehr in New York.

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