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 Wells Fargo & Co.'s (NYSE:WFC) third-quarter earnings of $3.24 billion, or 56 cents a share, blew out of the water analysts' expectations of $1.6 billion, or 35 to 36 cents per
share. The bank raked in $22.5 billion, compared with the $21.63 billion expected by analysts. One of the key factors driving revenue was the bank's acquisition of Wachovia Corp. "We are seeing a contribution to earnings and capital growth from Wachovia that is occurring earlier and better than originally anticipated," CFO Howard Atkins said. Atkins announced that cumulative merger expenses were reduced to approximately $5.5 billion, from $7.9 billion, due to labor savings and shedding asset risk. He added that the integration was on track to be complete by 2011. There has been a lot of concern about Wells Fargo's credit and consumer portfolios, particularly the commercial real estate portfolio that the bank took on from its acquisition of Wachovia. Credit-loss provisions were $6.11 billion, and commercial real estate loans have declined by $1 billion since last quarter (see chart). "We expect credit losses to peak in 2010 and consumer losses to peak at the beginning of the year" Atkins said.  That $1 billion buffer is less than the buffer some of Wells Fargo's competitors are putting up, according to Daily Finance, which wrote that "even as it has piled up three straight quarters of record profits this year -- it's not setting aside enough money to protect itself from future losses if the real estate market's nascent recovery stalls or home prices begin falling again, pushing foreclosures even higher." With that in mind, it is likely that Wells Fargo will wait just a bit before it repays TARP. Bloomberg wrote: The TARP injection "has served its purpose and it's time to repay the money," Chief Financial Officer Howard Atkins said in an interview today, without giving a timetable. Talks with regulators about the U.S. stake are continuing, Atkins said. "At the same time we want to continue to build our capital ratios," he said. So it's likely that it will be a few more quarters before the bank finally will repay TARP. - Maria Woehr
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Great quarter for Wells Fargo. They have consistently proven to beat earnings numbers when the market was waiting for another bank meltdown.