Never mind the $2.83 billion dollar loss -- investors are pushing Wells Fargo (NYSE: WFC) up $4.00 per share (20%) at 11:30 EST to above $20 for the first time in a couple of weeks. This is particularly amusing to me after 'my pal Warren' took some heat from Barron's (subscription required) only a few days ago for being the largest shareholder on a sinking ship.AP excerpt: Wells Fargo said today that it swung to a $2.83 billion loss in the fourth quarter as it took significant charges to reduce its exposure to the risky assets of Wachovia and built up its reserves to cover future losses.
"We wanted to make sure that as much of the risk of the balance sheet as we could was reduced when we start on this new, wonderful organization," said Chief Financial Officer Howard Atkins in an interview with The Associated Press. While this hurt the bottom line in the fourth quarter, Atkins said, it will have the effect of strengthening the company going forward.
I must confess feeling a little relief myself having recommended investors consider buying into one of the few large stable banks left. See: Chasing Value: 9 picks for 2009 -- APC, GE, ISRG, WFC and more.
In the past few weeks I have been adding to my own position. As my regular readers know, I eat my own cooking and on occasion it turns into humble pie.
Wells Fargo's board has announced a dividend of 34 cents per share. This is welcome news given that Bank of America (NYSE: BAC) cut its quarterly dividend back to a penny! The trailing dividend is $1.27 yielding 7.28%. If Wells is able to maintain the 34 cent or $1.36 per share dividend then the annual yield will be 8.8%.
While Wells did report a major loss largely attributed to its acquisition of Wachovia Bank, the combination creates one of the largest U.S. banks, with more than $1.23 trillion in assets and nearly $800 million in deposits, and operations in 39 states and Washington, D.C.
Other news likely propelling bank stocks may be the meeting of the Federal Reserve, Congress voting on President Obama's latest economic support bill, and discussion of creating an FDIC Federal Bank to buy out the over hang debt still held by banks and limiting liquidity.
UPDATE: Closing price $21.19, up $5.00, or 30.88%
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. DISCLOSURE: I currently own shares of BRK.B and WFC.
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Reader Comments (Page 1 of 1)
1-28-2009 @ 7:18PM
william lindblad said...
Well over a year ago I said that this is one outfit that I don't trust. Time will tell. I find it quite peculiar that they know what they have on the books while the rest of the banking community does not. ??
Maybe they actually know what is going on?
Whatever they say, they had a lot of exposure to this mess - signs on the lawn that say offered by - don't lie.
1-28-2009 @ 8:32PM
Sheldon said...
WL,
Delighted you took the time to comment. All banks had some exposure to the high risk practices of the past few years. It varied greatly from the worst offenders like Countrywide and IndyMac to the luckier WFC and JPM.
Some of the lucky ones have since made a mess... It looks like BAC bit off more than they can chew.
I would like to believe that Buffett, who has the position and knowledge to look at the books before he invested billions of dollars did in fact do so, or that the long shadow he casts at board meetings has had some affect.
BTW: As a side note...It is my understanding Spain is not in the same banking turmoil as other EU nations because they did not compromise their banking standards when everyone else did.