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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: ChanceIs who wrote (195699)4/11/2009 1:56:38 PM
From: Smiling BobRead Replies (1) of 306849
 
Thursday, April 9, 2009
Don't believe the Wells Fargo hype: report

Wells Fargo shares were sharply higher this morning, and other bank shares rose, after the giant bank (biggest lender in metro Philly and many other markets) projected higher-than-expected earnings for the first quarter.

But what Wells Fargo isn't telling us has some bank-watchers worried. "While the market is reacting favorably... we remain cautions based on what we don't know," writes analyst Paul J. Miller Jr. and his colleagues at FBR Capital Markets & Co., Arlington, Va., in a report to clients this morning. "We believe that credit quality materially deteriorated in the first quarter, and that Wells Fargo is under-reserving for expected future losses."

What WFC isn't telling, according to Miller: "What happened to nonperforming loans, and what would have been net charge-offs excluding purchase-accounting adjustments? What are the trends" in West Coast mortgage write-offs? "Was there any benefit" from the Financial Accounting Standards Board's new watered-down mark-to-market rules?... We hope these questions will be answered when the company reports results on April 22."

SEPARATELY: Zacks Investment Research has similar concerns about Wilmington Trust Corp. "We remain concerned with WL's exposure to commercial real estate-construction loans... Though WL lends mainly to smaller homebuilders in the Delaware Valley (60% of the portfolio) and not to national homebuilders, we expect a further deterioration in the credit quality on account of the ongoing weakness in sales," writes Neena Mishra. Earnings 4/24.
philly.com
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