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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (45084)	10/15/2008 8:50:14 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 71162

Reuters Wells Fargo profit falls 25 percent as credit weighs Wednesday October 15, 8:36 am ET By Jonathan Stempel NEW YORK (Reuters) - Wells Fargo & Co (NYSE:WFC - News), whose planned purchase of Wachovia Corp (NYSE:WB - News) will create the largest U.S. retail branch banking network, said on Wednesday third-quarter profit fell 25 percent, hurt by higher credit losses and investment write-downs. ADVERTISEMENT Net income dropped to $1.64 billion, or 49 cents per share, from $2.17 billion, or 64 cents, a year earlier, the fourth straight quarterly decline. Revenue rose 5 percent to $10.38 billion, while expenses fell 3 percent. Analysts on average expected a profit of 34 cents per share on revenue of $11.08 billion, according to Reuters Estimates. San Francisco-based Wells Fargo was able to wrest Wachovia from the arms of Citigroup Inc (NYSE:C - News) with a $15.1 billion all-stock takeover, largely because it never dove deeply into the risky mortgages and exotic debt that strangled Wachovia and rivals such as Washington Mutual Inc (Other OTC:WAMUQ.PK - News), Countrywide Financial Corp and IndyMac Bancorp Inc (Other OTC:IDMC.PK - News). The merger has won federal regulatory approval and is expected to close this quarter. It would create the nation's fourth-largest bank, with more than $1.4 trillion of assets, close to $800 billion of deposits, about 6,600 branches, 48 million customers and 280,000 employees. In buying Wachovia, Wells Fargo is expanding east of the Mississippi River, a big change for a lender known for a stagecoach that evokes 19th century westward migration. Wells Fargo said it saw a "tremendous inflow" of deposits late in the third quarter as nervous depositors fled rivals. "We're known and admired for our conservative financial position and a disciplined acquisition strategy that will not change," Chief Executive John Stumpf said in a statement. Wachovia, based in Charlotte, North Carolina, was pummeled by a $122 billion adjustable-rate mortgage portfolio it took on when it bought California lender Golden West Financial Corp in October 2006. Wells Fargo expects new federal tax deductions to cushion a $74 billion write-down tied to Wachovia's lending. Shares of Wells Fargo rose 3.6 percent to $34.74 in pre-market trading. HOME EQUITY LOSSES ELEVATED In the third quarter, Wells Fargo added $500 million to loan loss reserves, or 10 cents per share, largely for expected increases in credit losses in several consumer businesses. The bank set aside $2.5 billion for credit losses, while net charge-offs more than doubled to $2 billion. Chief Credit Officer Mike Loughlin said home equity loan losses will be "higher than normal" until home prices stabilize. Results also included $646 million of charges for exposure to Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News) preferred stock and Lehman Brothers Holdings Inc's (Other OTC:LEHMQ.PK - News) bankruptcy. Profit rose 10 percent to $1.59 billion from retail banking, and fell 86 percent to $83 million in wholesale business banking. Wells Fargo Financial, which lends to less credit-worthy people, had a $33 million loss. Net interest margin was 4.79 percent, compared with the second quarter's 4.92 percent and 4.55 percent a year earlier. Adding Wachovia would allow Wells Fargo's branch network to surpass those of Bank of America Corp (NYSE:BAC - News) and JPMorgan Chase & Co (NYSE:JPM - News) in size. Wells Fargo would trail Citigroup, JPMorgan and Bank of America in assets, though the latter will regain the top spot when it buys Merrill Lynch & Co (NYSE:MER - News). Billionaire Warren Buffett's Berkshire Hathaway Inc (NYSE:BRK-A - News; NYSE:BRK-B - News) is Wells Fargo's largest investor, owning 8.8 percent of its stock on June 30, Thomson ShareWatch said. Wells Fargo shares closed Tuesday at $33.52 on the New York Stock Exchange. They have risen 11 percent this year, compared with a 30 percent drop in the KBW Bank Index (Philadelphia:^BKX - News). (Editing by John Wallace)