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Wells Fargo Earnings Review

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July 20, 2011 – Comments (0) | RELATED TICKERS: WFC

Wells Fargo posted its earnings report yesterday morning and I took the opportunity to put it under a SWOT-light.

To summarize: 

It was a good report, although about a quarter of the earnings were from releasing loan loss reserves.  If that's backed out, there was still a nice cushion to cover April's dividend raise.

Loan quality and capital ratios continued to improve.  One new item I hadn't seen before was a cost reduction program - Wells is targeting about $1 billion of cuts to quarterly operating expenses by the end of 2012.  That's more than enough to move the needle if the program is successful.

It's still a bank with all the economic and balance sheet uncertainty that goes along with banks. 

It trades at a premium to its peers, but I believe the premium is deserved.   It doesn't rely on trading to the extent JPM does and operations are stronger than Citi or BAC.

As a nice little bonus, the stock price jumped enough since the earnings release to edge my CAPS pick into the green.

Long WFC and C.

Fool on!

Russ

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