Wells Fargo strong despite joining the mortgage mess


The latest victim of the current mortgage meltdown in America is Wells Fargo (NYSE: WFC). The bank announced late last night it is was going to be losing about $1.4 billion during its fourth quarter resulting from home loans that are not getting repaid.

Despite last night's announcement, the stock is actually trading higher in today's premarket, up 0.6% (last night, traders had initially pushed the stock down about 5%). The main reason why the stock is holding up so well is the impression on Wall Street that Wells Fargo still remains in much better shape than its peers.

Luckily for Wells Fargo, the company had the foresight to sell off the majority of the $2 trillion in loans it made starting back in 2001, so it was able to avoid falling too deeply into the mortgage fiasco that has been claiming bank after bank this year.


According to the Howard I. Atkins, chief financial officer, "the bank had largely avoided many of the credit and capital market problem areas in the industry." So far Wall Street seems to agree.

Wells Fargo will continue to supply home loans to customers, but it will only supply these loans directly to the customer, and will no longer acquire home equity loans through indirect channels.

Looking forward, the bank stated that it also plans to write off around $1 billion in 2008 and 2009.

Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.

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Last updated: February 13, 2012: 11:24 AM

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