{"id":537851,"date":"2010-04-21T12:12:55","date_gmt":"2010-04-21T16:12:55","guid":{"rendered":"http:\/\/www.theatlantic.com\/business\/archive\/2010\/04\/why-were-wells-fargos-earnings-so-unsurprising\/39293\/"},"modified":"2010-04-21T12:12:55","modified_gmt":"2010-04-21T16:12:55","slug":"why-were-wells-fargos-earnings-so-unsurprising","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/537851","title":{"rendered":"Why Were Wells Fargo’s Earnings So Unsurprising?"},"content":{"rendered":"

Today, Wells Fargo reported<\/a> a $2.4 billion profit in the first-quarter. That sounds pretty good — the bank’s earnings also beat analyst estimates by 3 cents-per-share, or 7%. Yet, in the context of other banks far exceeding what the market anticipated, 7% isn’t much. Why didn’t Wells surprise analysts? <\/p>\n

Part of Wells’ merely adequate performance was its high consumer credit-related charge-offs. The bank set aside $5.3 billion to deal with those losses. But Citigroup’s first quarter losses from bad loans were a whopping $8.4 billion — and the bank still out earned Wells by nearly $2 billion. So credit losses are likely only a small part of the story. <\/p>\n

A bigger reason is likely that Wells isn’t much of an investment bank. Other big banks like Goldman Sachs<\/a>, Morgan Stanely<\/a>, Citigroup<\/a>, JPMorgan<\/a> and Bank of America<\/a> all have strong investment banking divisions. Much of their success was due to trading profits. All of those listed had at least $4 billion of revenue from this source, but Wells had a paltry $537 million. <\/p>\n

The follow chart demonstrates this point: <\/p>\n

\"banks<\/p>\n

As you can see, all of these big banks except for Wells had very strong trading profits and soundly beat expectations — by at least 17%. Analysts likely underestimated how much revenue would be generated by trading in the first quarter. For Wells, that wasn’t a very significant factor, so the market’s expectation was pretty close.<\/p>\n



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Today, Wells Fargo reported a $2.4 billion profit in the first-quarter. That sounds pretty good — the bank’s earnings also beat analyst estimates by 3 cents-per-share, or 7%. Yet, in the context of other banks far exceeding what the market anticipated, 7% isn’t much. Why didn’t Wells surprise analysts? Part of Wells’ merely adequate performance […]<\/p>\n","protected":false},"author":1535,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-537851","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/537851","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1535"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=537851"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/537851\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=537851"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=537851"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=537851"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}