Wells Fargo 1Q13 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

$WFC Earnings Call Notes

“Our core loan portfolio grew by $50.9 billion, up 8%. Our credit losses reflected the benefit of a slowly improving economy and the high quality loans we’ve been originating over the past few years. Our credit losses in the first quarter declined to 72 basis points, the lowest level since second quarter 2006”

“growing deposits by $80 billion, up 9% from a year ago”

“grew our return on assets, or ROA, by 18 basis points to 1.49%, and our return on equity increased by 145 basis points to 13.59%. We continued to increase our capital levels, growing our estimated tier one common equity under Basel III to 8.39%.”

“We do not need additional legislation aimed at big banks. Important and significant regulatory changes have been made since the financial crisis, and we need to give existing regulations a chance to work”

“We also funded 1 in 4 U.S. home mortgages in 2012, a total of over 2 million mortgage loans”

“The momentum from the housing rebound during 2012 has remained strong in the early months of 2013.”

“With over 80 businesses, they’re not all going to grow every quarter.”

“Our servicing portfolio continued to perform better than the industry. Our total delinquency and foreclosure rate was 6.54% in the first quarter, down 50 basis points linked quarter”

“With respect to M&A, remember that the biggest users of capital on an M&A side would be in the deposit side of the franchise, of which of course we are at our federal statutory number, or close to it…We’re still interested in things around wealth, help with retirement, but I don’t see that as a huge draw on our capital.”

[analyst question] “Now that you’re starting to see a more sustained slowdown in mortgage applications, pipeline, and originations, how are you thinking about the headcount in this division? And have you begun to address some of the variable costs there?”

[answer] “We actually added to the number of team members in the mortgage business in the fourth quarter, because we wanted to improve the customer service in the business.”

“when we think about our mortgage repurchase reserve…We need to be very comfortable that not only current demands but also future expected demands are going to come down. Hopefully it will be in the next few quarters…You know, John, an improving housing market sure is a good sign regarding that issue.”

“But remember, housing is improving every day. More people have more equity in their homes. Americans have not lost their emotional attachment to home ownership.”

“Well, I wouldn’t jump to any conclusions about loan growth in the industry in the first quarter. If you look at the HA data, for the last few years the first quarter tends to be a seasonally low quarter, and what I would do, and again, this is just me, I’d take the first quarter decline for the industry and also then add to that the fourth quarter that we saw last quarter increase and probably average those together. And remember, the fourth quarter of last year was extremely high, because of some of the changes and decisions that folks were making because of the potential changes in taxes and the code and so on. So again, I think what we’re seeing in the industry is a steady loan growth if you average over the last few years at about one-ish percent on a quarterly basis.”

“If you look at some of the drivers, if you look at household formation, if you look at cost of financing, cost of housing, there’s a lot of tailwinds, a lot of favorable attributes. Now, nobody can predict what’s going to happen, but if anything today there’s probably a shortage of housing on the market.”

“the housing market is as much driven by confidence and by improvements in values as it is with rates. I don’t know of many people are on the sidelines and say, “I’ll only buy a house if the rate’s 3.25%, and I won’t buy at 4.25%.” I think it’s about jobs, about confidence, about feeling good about where things are going. Think about when you buy a house, it’s what you make, what the house costs, and what your financing costs are that are the big three.”

“First of all, I want to tip my hat to all the team members who helped make [the Wachovia] merger the best one I’ve been around, and it was the largest, of course, in U.S. bank history…In fact, if you look at productivity numbers, sales per day, referrals, cross-sell, the gap is closing rapidly. In fact, some of the best innovations and ideas we’re getting now for future growth come from our newest team members. In fact, it’s hard to distinguish east and west anymore.”

“some things, just because you did it that way for 20 years doesn’t mean you need to do it for the next 20 years.”