My time spent researching WFC has dramatically been curtailed the past couple of months, however after reading a couple of analyst reports this week I imagine Wells Fargo will once again earn approximately $.92 this quarter as well as the 2q-2013; There is a wind at their back through reducing expenses.
During the second half of the year I can imagine their expenses to have been reduced by $1billion per q compared to yoy comparisons, however they will have reduced earnings because of lowered loan originations. Based upon recent loan delinquencies I think they will have loan losses of only $1.6B per q during the last half of the year.
Because of the finite amount of loans to refinance my guess is that their originations will dip from $125B down to $80B during the fourth quarter 2013, and unless something dramatically changes they are looking at only $60B or less per quarter in mtg originations going forward from 4q on into the forseeable future.
I believe 55% efficiency ratio to be obtainable by 4q-2013 and that earnings of $.88 to $.92 during the last half of this year as being obtainable, which would mean with a stable stock market the share price could still have some upward potential even though our earnings are under pressure.
There are only about $1.7 Trillion in mortgage loans still yet to be refinanced, of which it is estimated only $1 Trillion will get refinanced to lower rates. My earnings estimates above are based on the assumption that Wells will originate $125B this 1q-13 and another $125B in 2q-2013 and the refi cycle will have then ended.
My guess is that the FRB will stop buying MBS the last half of this year, Wells will be paying out $1.06 dividend, and its non-performing assets will start to dramatically drop. I see them as still being over provisioned however they might get permission from their regulators to stop releasing loan loss reserves during the last half of the year especially if they can continue to increase their balance sheet.