WFC

JP Morgan and Wells Fargo Post Solid First Quarters

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Although not surprising, two of the United States’ largest banks, JP Morgan (click ticker for report: ) and Wells Fargo (click ticker for report: ) kicked off the first quarter with terrific earnings. JP Morgan exceeded earnings expectations, generating a record $1.59 per share in earnings on revenue of $25.8 billion. Wells Fargo’s results weren’t too shabby either, boasting record earnings per share of $0.93 on revenue of $21.3 billion. JP Morgan Much of JP Morgan’s quarter was driven by strong performance from the mortgage business, which earned a return on equity of 14% (image source: JPM Q1 2013 presentation). Originations grew 37% year-over-year and 3% sequentially to $52.7 billion. Net interest margins on mortgages continue to compress, and CFO … Read more

Tesla’s Aggressive Financing: Revolutionary or Shortsighted?

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Electric vehicle maker Tesla (click ticker for report: ) stole headlines over the past several days. The firm announced that it will be profitable on both a GAAP and non-GAAP basis as its first quarter sales exceeded expectations (4,750 units versus 4,500 units estimate). Tesla also cancelled its 40 kWh battery version, which is positive, in our view, because it will raise the firm’s average selling price, likely boosting margins. We were a bit surprised to see the company have software limit the driving range to 40kWh rather than force consumers to upgrade to 60kWh batteries, but we think the decision could positively impact brand perception. More importantly, Tesla revealed what it’s calling a “revolutionary” financing plan. Tesla has partnered with … Read more

Improving Credit Quality at JP Morgan and Wells Fargo

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Over the past week, both JP Morgan (click ticker for report: ) and Wells Fargo (click ticker for report: ), two of the nation’s most important banks, reported fourth quarter results. JP Morgan reported better than anticipated earnings of $1.39 per share, but the firm’s net interest margin (NIM)—return on deposits less the cost of deposits—continues to decline. As the graph below shows, the bank’s NIM has fallen to 2.4% in the most recently-reported quarter from 3.42% in fiscal year 2009 (Image Source: JPM Q4 2012 Earnings Presentation). Such a trend remains an ongoing problem with the banking sector as a whole, but the weakness is not tragic and does not alter our long-term thesis on the group, which is tied to improving real … Read more

Jamie Dimon Agrees; Housing Is Back

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Since the turn of the year, the housing market has been on the mend (click here for when we spotted the recovery), and homebuilders have been posting excellent results as of late. At the end of July, we more definitively announced that we thought the US housing market was back, and subsequent results and commentary have strengthened our thesis. We plan to take a close look at our valuation models of a number of homebuilders today, but we don’t expect any companies’ share prices to fall outside of their updated fair value ranges, which we plan to release this afternoon. During the past several months, many US major banking institutions and mortgage originators have been posting fantastic results. Both JP Morgan Chase (click ticker … Read more

JP Morgan and Wells Fargo Report Third Quarter Results

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Friday morning was big for banks, as both JP Morgan Chase (click ticker for report: ) and Wells Fargo (click ticker for report: ) reported third quarter results. Earnings for JP Morgan surged 37% year-over-year to $1.40 per share, which was much higher than the consensus expectation of $1.24 per share. Revenue grew 6% year-over-year to $25.9 billion, slightly better than consensus expectations. Earnings at Wells Fargo came in at $0.88 per share, a penny better than consensus estimates. Revenue fell $100 million sequentially to $21.2 billion, which was a little over $200 million short of consensus expectations. Though net interest margins slipped at both banks, the third quarter showed impressive results from the mortgage business. Mortgage originations at JP … Read more