But that was down 3 percent from the previous quarter. Whether they’re right looks like a toss-up. More recently, banks have paid billions of dollars in fines to end allegations of rigging in markets such as foreign exchange. Wells Fargo’s wholesale banking division recorded profit of $2.1 billion, also unchanged from the same quarter past year.
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But its exposure to energy loans meant provisions for credit losses jumped by about $346 million (241.78 million pound) from a year earlier to $831 million.
Banks will have very little leeway once debt problems arise. Loans to energy companies comprised around 2 percent of Wells Fargo’s overall portfolio, but the bank said in the third quarter that there was a risk of delinquency on $566 million in those balances.
CEO John Stumpf has amassed deposits and built the bank’s loan portfolio with strategic acquisitions as he waited for the Federal Reserve to increase interest rates.
One bright spot for the industry has been lower litigation costs as old cases are settled and fewer new ones are filed. What’s changed is that investors are increasingly concerned that China’s troubles presage global economic problems that could hobble America’s plodding recovery. Smaller banks will simply not be able to match the spending of the money centers in these areas over time and could lose share as a result.
However, rivals like UBS and Morgan Stanley have lured away almost a third of the 270 Credit Suisse brokers despite Wells’effort to offer generous incentive packages, according to press reports. That means shareholders are assuming either that the banks will earn less than expected or that the value of loans, bonds and other assets on their balance sheets is overstated – or both. Book value per share was $69.46, while tangible book value per share was $60.61. That’s a dubious distinction that in the past year or two was limited to Citi. The stock has a market cap of $249.36 billion and a price-to-earnings ratio of 11.79. Lawson Kroeker Investment Management now owns 20,427 shares of the financial services provider’s stock worth $1,110,000 after buying an additional 452 shares during the last quarter.
What has Wall Street so anxious?
The San Francisco-based bank’s net income slipped to $5.34 billion, or $1.03 per share, in the three months ended December 31, from $5.38 billion, or $1.02 per share, a year earlier. Revenue rose 4% to $18.6 billion, beating estimates of $17.9 billion. Return on assets was 1.27%, and return on equity was 12.23%.
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Wells Fargo’s net interest income, a measure of the interest received from loans after paying for funding and accounting for potential loan losses, rose 0.58 percent to $10.76 billion. Analysts have now tapered their expectations for Goldman’s net income per share to $3.30 from $3.71 previously according to Thomson Reuters I/B/E/S estimates.
