Wells Fargo & Co (NYSE :WFC) announced their third-quarter earnings Wednesday morning announcing $3.2 billion in profit for the quarter and also announced that it expects quarterly losses from non-performing loans to peak sometime during the loan.
The strong earnings announcement from Wells Fargo was primarily attributed to its community banking profits and investment gains from mortgage gains, but the San Francisco based bank still faces significant losses from increasing numbers of delinquent loans.
As part of its earnings announcement, Wells Fargo stated that their analysts believe that losses from quarterly loans will peak at some point in 2010. The bank also stated that its levels of at-risk loans rose faster during the third quarter than at some of its major competitors, including JP Morgan Chase (NYSE: JPM) and Bank of America (BAC).
Wells Fargo has also set aside less cash than many of its large competitors to offset future loan losses. Atlantic Equities analysts, Richard Staite, said that Wells Fargo’s future reserve for loan losses is about 3.1% of its total loan portfolio. According to Staite, JP Morgan Chase has 4.8% of its loan portfolio set aside as cash for future losses and Bank of America has 4% of its loan portfolio set aside for future losses. During the third quarter, Wells Fargo increased its cash reserves by $1 billion after it took permanent loan losses of $5.1 billion from defaulted loans.
Wells Fargo also had to post the sobering news that its total assets declined again during the 3rd quarter due partially due to low demand for loans. The bank now has $1.23 trillion in assets, down from $1.31 trillion in assets at the end of last year when it hard purchased Wachovia. The bank also had $800 billion in loans at the end of quarter, down sharply from $864.8 billion at the beginning of the year.
