And we all thought Wachovia is killing Wells Fargo. In the last quarter, Wells Fargo would’ve been trashed if it wasn’t for Wachovia’s side of revenue and earnings to help offset credit losses.
Year over year, Wells Fargo quarterly earnings rose 47% even amid increasing credit losses. Since December 31, Wells Fargo have been expanding and adding market share as competition, like Countrywide and other major banks disappear or scale back its operation.
Q2 net income rose to $2.58 billion, or 57 cents a share, from $1.75 billion a year ago, or 53 cents a share. This 81 percent increase in net income is mainly due to Wachovia’s portfolio, as revenue pretty much doubled to $22.51 billion.
Everything sounds good so far, so why did the stock price go down? Analyst is afraid that more capital raising is needed, as Wachovia has a huge options arm portfolio, which is yet to default in mass numbers.
The federal reserves say that Wells Fargo need another $13.7 billion in capital to be adequately funded, but if it can earn $2.58 billion in one quarter, then the troubles seem manageable. The only flaw in this argument is if credit losses and the economy goes down drastically, then Wells Fargo (and its shareholders) are in for tough times ahead.