Tag: wfc

I’ve said it before and i’ll say it again……financials earnings are not to be taken at face value…..Until access to capital is normalized they are essentially making money off cheap gov’t funds. Because of that, saying this was a good/great quarter isn’t totally true. For what it is worth, the same can be said of every other bank also, this is not unique to Wells.

Here is the Wells Fargo (WFC) press release:
WFC Q2 2009

The stock is selling off because of the build in reserves. The expectation from WFC is that the current levels will cover losses there for the next 12-24 months. It is a guess, nothing more. We are in times that none of the managers there have gone through (or at any other banking institution) so to say “we have enough for “x” time frame” is an educated guess, nothing more.

I am still holding WFC shares (down about 10%) because I still think two years from now, there will be essentially three banks left, WFC, Bank of America (BAC) and JP Morgan (JPM) along with thousands of players dwarfed by those three.

Why WFC? If/when Congress decides these institutions are now “to big to fail” and decides to pass legislation to make them less so, my guess is that the investment bank divisions will be the ones separated from the depository institutions. If that happens BAC and JPM will be much more adversely affected than WFC which has made a huge push into insurance services over the last year and whose recent results are less dependent on those operations.

Disclosure (“none” means no position):Long WFC

$.35 cents on the dollar it seems would be the price for these loans….

From National Mortgage News:

As the mortgage and banking industries debate whether the PPIP program will work and whether a similar effort over at the FDIC will ever see the light of day, Wells Fargo & Co. recently (and quietly) sold a $600 million portfolio of mostly non-performing subprime loans. Or so we’re told.

Late last week a source close to the transaction identified Arch Bay Capital of Irvine, Calif., as the winning bidder on the portfolio whose loans were originally funded by two mid-sized subprime wholesalers: Accredited Home Loans, and NovaStar Financial.

Arch Bay co-founder Steven Davis declined to comment on the purported sale to his firm, referring calls to his partner Shawn Miller who serves as Arch Bay’s CEO. Mr. Davis didn’t deny that the sale took place but he wouldn’t confirm it either. Mr. Miller could not be reached for comment.

Meanwhile, one question the sale raises is this: How exactly did the publicly traded Wells wind up with so many crummy non-prime loans from these once highflying firms? Answer: I don’t know and Wells isn’t talking. A company spokesman said the bank’s corporate policy is to not discuss its loan auctions.

Perhaps one reason the PPIP (Public-Private Investment Program) and the Federal Deposit Insurance Corp.’s ‘Legacy Loan’ sale initiative (involving whole loans, presumably residential and commercial mortgages) hasn’t caught fire is ‘sunshine,’ that is, the concept of disclosure. If bankers and investment bankers use these government programs that means all the messy details of their crappy investments might see the light of day, which could anger shareholders — and maybe even board members who might lean toward being “activists.”

The nice thing about the private non-performing loan market is that none of these messy details have to see the light of day, including the price paid. One banker told me that the 35 cents on the dollar that Arch Bay reportedly paid was twice what some hedge fund bidders were offering.

No matter how you do the math, Wells is going to take a nice hit on the sale, if it hasn’t done so already. Will the public ever get wind of the NPL sale price (outside this story)? That’s hard to say. The Securities and Exchange Commission requires that publicly traded companies disclose “material events” in their 10-Qs and Ks but when you have a mega bank the likes of Wells a $600 million loan auction might garner a sentence in the next earnings report, at best.

It is another reason to assume the PIPP program is not needed nor will it take off if private market deals are being worked out UNDER the radar rather than being exposed for all to see. I am guessing the banks do not want these prices exposed.

It also does bode well for the secondary markets if the log jam is starting to loosen and deals are getting done, albeit at a trickle. Any deal that gets done w/o the gov’t “help” is a real positive for everything.

Hopefully more of these deals will start happening….

Full Post

Disclosure (“none” means no position):Long WFC

$.35 cents on the dollar it seems would be the price for these loans….

From National Mortgage News:

As the mortgage and banking industries debate whether the PPIP program will work and whether a similar effort over at the FDIC will ever see the light of day, Wells Fargo & Co. recently (and quietly) sold a $600 million portfolio of mostly non-performing subprime loans. Or so we’re told.

Late last week a source close to the transaction identified Arch Bay Capital of Irvine, Calif., as the winning bidder on the portfolio whose loans were originally funded by two mid-sized subprime wholesalers: Accredited Home Loans, and NovaStar Financial.

Arch Bay co-founder Steven Davis declined to comment on the purported sale to his firm, referring calls to his partner Shawn Miller who serves as Arch Bay’s CEO. Mr. Davis didn’t deny that the sale took place but he wouldn’t confirm it either. Mr. Miller could not be reached for comment.

Meanwhile, one question the sale raises is this: How exactly did the publicly traded Wells wind up with so many crummy non-prime loans from these once highflying firms? Answer: I don’t know and Wells isn’t talking. A company spokesman said the bank’s corporate policy is to not discuss its loan auctions.

Perhaps one reason the PPIP (Public-Private Investment Program) and the Federal Deposit Insurance Corp.’s ‘Legacy Loan’ sale initiative (involving whole loans, presumably residential and commercial mortgages) hasn’t caught fire is ‘sunshine,’ that is, the concept of disclosure. If bankers and investment bankers use these government programs that means all the messy details of their crappy investments might see the light of day, which could anger shareholders — and maybe even board members who might lean toward being “activists.”

The nice thing about the private non-performing loan market is that none of these messy details have to see the light of day, including the price paid. One banker told me that the 35 cents on the dollar that Arch Bay reportedly paid was twice what some hedge fund bidders were offering.

No matter how you do the math, Wells is going to take a nice hit on the sale, if it hasn’t done so already. Will the public ever get wind of the NPL sale price (outside this story)? That’s hard to say. The Securities and Exchange Commission requires that publicly traded companies disclose “material events” in their 10-Qs and Ks but when you have a mega bank the likes of Wells a $600 million loan auction might garner a sentence in the next earnings report, at best.

It is another reason to assume the PIPP program is not needed nor will it take off if private market deals are being worked out UNDER the radar rather than being exposed for all to see. I am guessing the banks do not want these prices exposed.

It also does bode well for the secondary markets if the log jam is starting to loosen and deals are getting done, albeit at a trickle. Any deal that gets done w/o the gov’t “help” is a real positive for everything.

Hopefully more of these deals will start happening….

Full Post

Disclosure (“none” means no position):Long WFC