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rd80 (99.11)

A shareholder’s thoughts on recent Wells Fargo news

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March 11, 2009 – Comments (1) | RELATED TICKERS: WFC

There’s been a lot of news regarding WFC and banks in general over the past couple of days and I wanted to capture some key points and thoughts as a journal to myself.

March 5 – WFC acquires BridgeStreet Consulting Group

Terms of the acquisition weren’t disclosed.  From the release, BridgeStreet sounds like a small, privately held firm.

Thoughts:  A minor positive indicator on capital position.  Smart bankers aren’t generally busy making acquisitions if they need to conserve or raise capital.  I believe John Stumpf and Dick Kovacevich are smart bankers.

March 6 – WFC cuts dividend

WFC reduced the dividend from 34 cents/quarter to 5 cents/quarter.  The move will save about $5 billion per year.  Other highlights from that press release:
Strong operating results for the first two months of the quarter.
Mortgage originations over the two months exceeded the entire 4th quarter results.
Wachovia merger on track.
Additional savings of $2 billion expected over 2009.
CEO John Stumpf, “…and these actions will help us repay the government’s investment at the earliest practical date.”

Thoughts:  As a shareholder, I’m not happy to see the dividend cut.  However, under the circumstances, I believe it was the right thing to do.  The $5 billion per year along with the announced cost savings can go toward acquisitions or buying back the Treasury preferred shares (my ‘preferred’ choice). 

March 10 – Citi internal memo announces operating profit for Jan-Feb ‘09

Mr. Pandit released an internal memo including the statement “… we are profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007.” 

Thoughts:  If C is able to turn in a good quarter (whether it's actually profitable or not), it’s reasonable to assume Wells (and several other banks) will turn in great quarters.

Bottom line – I’m nervous about holding WFC, but my net take on the recent news cycle is positive.  I added a small piece to my position at 8 and change a few days ago. 

The one piece of news I’d most like to see is a filing with Treasury to buy back the preferred.

1 Comments – Post Your Own

#1) On March 12, 2009 at 2:19 PM, DrRoberts1 (< 20) wrote:

Hi RD80    I follow WFC very closely, My wife and I have substantial long positions. It is my belief that although reluctant to cut the dividend on top of the tanking share price, WFC management is anxious to pay back the TARP funds. I am sure by now that you have read the relevant portions of Buffet's interview on CNBC which should obviously give your morale a boost as it did to the share price. As you know, Dick Kovacevich and John Stumpf are two of the best in the business and they are credible as well. In typical Wells' understated fashion, Mr. Stumpf remarked that the first two months were "strong". In a couple of years we will be laughing on our way to the bank, Wells Fargo bank that is.

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