A shareholder’s thoughts on recent Wells Fargo news
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.