Wells Fargo (NYSE:WFC) beat expectations with a record quarterly performance for Q1 2012. The bank with the largest market cap earned an unprecedented $4.2 billion for the quarter from revenues of $21.6 billion.  The bank posted record revenue figures for the year 2011 even as most competitors such as Bank of America (NYSE:BAC) languished with losses across operating divisions.
We updated our price estimate for Wells Fargo’s stock from $31 to $35 and attribute the 15% upward revision to Wells Fargo’s dividend payout ratio, which now considers the effect of the 83% hike in dividends. Also, as the bank has yet to detail its share repurchase program. We have assumed a $5 billion repurchase for this year.
- How Have Mortgage Origination Volumes For The Largest U.S. Banks Changed In The Last Five Quarters?
- How Much Of The Mortgage Origination Market Did The Five Largest U.S. Banks Capture In Q2?
- Wells Fargo Looks Undervalued Despite Lukewarm Q2 Results
- A Look At Results and Implications Of The Fed’s 2016 Stress Test For Banks
- How Is The Loan-To-Deposit Ratio For U.S. Banks Expected To Change In The Near Future?
- How Do The Largest U.S. Banks Fare In Terms Of Meeting Core Capital Ratio Targets?
Mortgage Business Lessons Anyone?
Wells Fargo continues to awe investors with its industry leading performance in the mortgage business, especially given that banks are shying away from the business after being badly burnt in 2008. In fact, most competitors continue to fight huge legacy issues related to their mortgage portfolios. Wells Fargo has been able to do away with all these issues almost completely, with the bank deriving well over a fifth of its value from mortgages.
Wells Fargo originated $129 billion worth of loans this quarter, up from $120 billion in Q4 2011. The bank also services a residential mortgage portfolio worth $1.9 trillion now.
Another factor that helped Wells Fargo’s results is the notable improvement in provision numbers as loan charge-offs declined significantly for the quarter. Charge-off rates for the quarter were at their lowest level since 2007, and provisions set aside saw a $400 million reduction.Notes: