China's Central Bank Eliminates Margin T…

19-01-2017 Hits:176 BoomBustBlog Reggie Middleton

China's Central Bank Eliminates Margin Trading of Bitcoin

There have been rumors that the Chinese Central Bank (PBoC - People's Bank of China) would limit or eliminate margin trading in Bitcoin. It is now official, sort of...

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Is Donald Trump Truly Successful or Born…

18-01-2017 Hits:309 BoomBustBlog Reggie Middleton

Is Donald Trump Truly Successful or Born With A Silver Spoon? An Analysis

In social media and mainstream media, I often hear Donald Trump quoted (by himself, and others) as an extremely successful, self-made man. As an entrepreneur for nearly all of my...

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As I Promised, EU Is Colliding Into Prac…

17-01-2017 Hits:749 BoomBustBlog Reggie Middleton

As I Promised, EU Is Colliding Into Practical Confines of NIRP, Bank Hemorrhaging Up Next

Nearly a year ago, I warned subscribers of consequences stemming from the ECB's negative interest rate program. Here's an exceprt from our resarch report titled European Banking Macro Issues for March...

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Is Bitcoin Too Risky? Whenever the Bitco…

12-01-2017 Hits:1370 BoomBustBlog Reggie Middleton

Is Bitcoin Too Risky? Whenever the Bitcoin is Mentioned in Financial Pop Media, Ignorance Ensues

I hate to be the one to break bad news to you, but most of the pop media/mainstream media financial pundits that I hear and see opine on bitcoin have...

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What Happens When Rates Rise While the S…

10-01-2017 Hits:779 BoomBustBlog Reggie Middleton

What Happens When Rates Rise While the S&P 500 Relies on Cheap Credit To Boost EPS?

So, the stock market, bond market and real estate markets are all at all-time highs. Everything is Awesome! You know better than that. You see, when the bond market wakes...

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Debt Encumbered Oil, Sovereign Soil, Toi…

10-01-2017 Hits:601 BoomBustBlog Reggie Middleton

Debt Encumbered Oil, Sovereign Soil, Toil & Trouble: Can't You Hear Seems Cracking in the OPEC Empire?

@WSJ reports Libya Ramping Up Oil Production, Threatening OPEC (supposed) Plans to lift global oil place by artificially limiting supply. This would be in violation of federal antii-trust laws in the...

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Ten Years Since BoomBustBlog Was 1st Pub…

09-01-2017 Hits:917 BoomBustBlog Reggie Middleton

Ten Years Since BoomBustBlog Was 1st Published & That Initial Research Still Relevant Today

We have looked into insurance companies' performance last month in regards to our bearish real estate thesis. A small comederie of companies are suffering losses and/or declining profits as we've exected....

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The Macro Truth About The Big Bitcoin Po…

07-01-2017 Hits:1085 BoomBustBlog Reggie Middleton

Bitcoin has dropped precipitously, and as is usual, we have the cacophony of instant digital currency pundits cackling about as if they had a clue. This is the inaugural post...

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To Bust or Not To Bust: Are We In A Real…

04-01-2017 Hits:772 BoomBustBlog Reggie Middleton

To Bust or Not To Bust: Are We In A Real Estate Bubble?

Banks are showing thin NIM, yet many of the big banks are able to boast stable if not slightly improving credit metrics. This doesn’t make sense considering the explosive growth...

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What Happens To Real Asset Lending Banks…

03-01-2017 Hits:621 BoomBustBlog Reggie Middleton

What Happens To Real Asset Lending Banks When the Real Funding Rate Appears? We're About to Find Out

During the financial crisis of 2008, money market funds who subjectively agreed to hold their NAV (net asset value) unit prices at $1 “broke the buck”. That is, the unit...

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Stress Test on Banks’ Earnings Facing th…

30-06-2014 Hits:44740 BoomBustBlog Reggie Middleton

Stress Test on Banks’ Earnings Facing the Veritaseum UltraCoin Value Transaction Platform

My last post on the topic of disintermediation during a paradigm shift was Wall Street Should Be First To Invest In Reggie Middleton's UltraCoin, Much Of It Won't Be Here In...

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Introducing the "Unbreakable Promis…

09-06-2014 Hits:39537 BoomBustBlog Reggie Middleton

Introducing the "Unbreakable Promise" As a Method Increasing Efficiencies and Decreasing Risk

Continuing on the margin compression theme originally laid out in Margin Compression Is Coming in the Payment Processing Space As $100 Million Pours Into Startups, I illustrate mathematically how the bit...

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Below, please find an udpate to the work published on WFC. See the Doo Doo 32 Drill Down and the Forensic Analysis for a background of my viewpoints on this company.

Wells Fargo & Company – Q2 2008

Income statement analysis

In 2Q2008, Wells Fargo revenues increased 16% to $11,429 mn from $9,981 mn in 2Q2007 off 21% increase in net interest income and 10% increase in non-interest income. The banks net interest income increased 21% to $6,278 mn as a result of 33% decline in interest expense to $2,269 mn. The banks interest income remained nearly flat at $8,547 mn in 2Q2008 compared with $8,573 mn in 2Q2007. Overall the banks net interest margin improved 23 basis points reaching 4.92% in 2Q2008 as a result of decline in funding cost as a result of high proportion of checking and transaction accounts in their core deposit mix. Banks non-interest income increased 10% y-o-y to $ 5,181 mn primarily off higher fees from mortgage banking partially offset by higher losses on debt securities and reduction in net gains from equity investments. However Wells Fargo revenues after provisions declined 8% as a result of 318% increase in provision for credit losses to $3,012 mn in 2Q2008, up from $720 mn in 2Q2007 signaling continued deterioration in the credit quality of the banks loan portfolio.

Wells Fargo’s non-interest expense increased by a nominal 2% to $5,860 mn in 2Q2008  due to increased salary (6%), occupancy cost (8%) and other expenses (6%) partially offset by decline in incentive compensation (10%) and operating lease (31%). As a result of increased revenue growth the banks efficiency ratio improved 51.1% in 2Q2008 from 57.9% in 2Q2007. Overall the banks net income declined 23% to $1,753 mn or (0.53 per share) in 2Q2008 compared with $2,279 (or 0.67 per share) in 2Q2007 as mounting provisions continued to create pressure on earnings.

Credit metrics

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Wells Fargo credit metrics continued to deteriorate in all aspects as seen from the table above. In 2Q2008, 90 days loans past due (an indicator of future charge-off and delinquency) increased 9.1% q-o-q and 63.9% y-o-y. Loans past due 90 days and non-performing assets represented a significant 3.7% and 10.9% of shareholder’s equity at the end of 2Q2008, rising alarming questions about the magnitude of potential impact relating to worsening credit situation. As a result of rising charge-off, Wells Fargo had increased its provisions to $3.0 bn (0.77% of average loans) in 2Q2008 compared to 0.7 bn (0.22% of average loans). Wells Fargo had changed its off policy from 120 days to 180 days for its home equity portfolio enabling it to defer $265 mn charge-off in 2Q2008. However despite this change in charge-off policy, net charge-off increased to 1.55% of average loans in 2Q2008 compared to 0.87% in 2Q2007.