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WFC,JPM,C,BAC,BA

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^{Published in Business and Finance on Thursday, October 21st 2010 at 7:16 GMT by Market Wire}  

CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Wells Fargo & Company (NYSE: [ WFC ]), JPMorgan Chase & Co. (NYSE: [ JPM ]), Citigroup Inc. (NYSE: [ C ]), Bank of America Corporation (NYSE: [ BAC ]) and The Boeing Company (NYSE: [ BA ]).

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Here are highlights from Wednesdaya™s Analyst Blog:

Wells Fargo Beats Estimates

Wells Fargo & Companya™s (NYSE: [ WFC ]) third quarter 2010 operating earnings were 60 cents per share, well above the Zacks Consensus Estimate of 55 cents. Net income applicable to common stock came in at $3.34 billion compared with $3.24 billion in the prior-year quarter.

During the quarter, Wells Fargo earned $20.87 billion (down 7% year over year and 2.3% sequentially) of combined revenue. Revenue results were below the Zacks Consensus Estimate of $20.96 billion. Pre-tax pre-provision profit was $8.6 billion, including approximately pre-tax $380 million negative impact from changes to Regulation E and related overdraft policy changes.

Commercial banking, mortgage banking, commercial real estate brokerage, asset-based lending, asset management, auto dealer services, brokerage, commercial mortgage servicing, private student lending, real estate investment banking, retirement services and debit cards had double-digit annualized sequential revenue growth. The growth in all businesses signifies good things on the horizon for the company.

Quarter in Detail

Net interest income for the quarter came in at $11.1 billion, down from $11.4 billion in the prior quarter and $11.7 billion in the prior-year quarter. Net interest margin (NIM) decreased to 4.25% from 4.38% sequentially and 4.36% year over year. Lower purchased credit-impaired (PCI) loan resolution income was attributed to a decline in NIM in the reported quarter and due to continued run-off of non-strategic assets.

Total non-interest income came in at $9.8 billion, marginally down from $9.9 billion in the prior quarter as higher trading revenue and growth in mortgage banking income was offset by decline in net gains from equity investments, insurance fee revenue and deposit service charges.

Non-interest expense for the quarter was $12.3 billion, down 15% annualized from the prior quarter. Reduction in Wells Fargo Financial restructuring expenses and lower litigation accruals led to a decline in expenses.

Average total core deposits of $772 billion as of September 30, 2010 were up 5% annualized from $761.8 billion as of June 30, 2010. Growth in average mortgage escrow deposits and consumer checking accounts improved the deposit base.

Credit Quality

Credit quality improved more than expected during the reported quarter. Provision for credit losses declined 14% sequentially to $3.45 billion from $3.99 billion in the prior quarter. Credit performance improvement was facilitated by slowly improving economy together with steps taken by Wells Fargo over the past several years to advance underwriting standards and exit portfolios with unattractive credit metrics.

Net charge-offs declined to $4.1 billion or annualized 2.14% of average loans compared with $4.5 billion or 2.33% of average loans in the prior quarter.

Non-accrual loans increased to $28.3 billion or 3.76% of total loans compared with $27.8 billion or 3.63% of total loans in the prior quarter. Allowance for credit losses was $24.4 billion as of September 30, 2010 compared with $25.1 billion as of June 30, 2010. Wells Fargoa™s total assets as of September 30, 2010 were $1.22 trillion and net loans were $729.7 billion.

Evaluation of Capital

As of September 30, 2010, Wells Fargo shareholdersa™ equity was $123.7 billion, compared with $119.8 billion as of June 30, 2010. Capital ratios remained strong, with Tier I capital and total capital ratio at 10.9% and 14.9%, respectively, compared with 10.4% and 14.4% sequentially. Book value per share improved to $22.04, up from $21.35 in the prior quarter and $19.46 in the prior-year quarter.

Three of Wells Fargoa™s closest competitors a" JPMorgan Chase & Co. (NYSE: [ JPM ]), Citigroup Inc. (NYSE: [ C ]) and Bank of America Corporation (NYSE: [ BAC ]) a" have reported impressive results with positive net income and a slowdown in provisions for credit losses for the corresponding quarter.

We think Wells Fargo is well positioned compared to its peers as the Wachovia acquisition and the demise of some smaller players helped it garner a large share in the mortgage markets. However, we believe that the recent financial regulations will have a negative impact on both top- and bottom-line results of the company in the upcoming quarters.

Boeing Flies Past Consensus

The Boeing Company (NYSE: [ BA ]) has shown resilience in its core businesses with third quarter fiscal 2010 earnings of $1.12 per share, outpacing the Zacks Consensus Estimate of $1.07. The companya™s results reflect higher Commercial Airplanes volume and strong performance across its core businesses.

In the year-ago quarter, performance was wayward, with Boeing clocking a loss of $2.22 per share due to reclassification of research and development costs of $2.60 per share incurred for the first three 787-series test airplanes. The company also digested a charge of 99 cents per share from the delay in producing a new version of the 747-8 series freighter jet leading to late design changes.

The street was bullish on Boeinga™s ability to report stable quarterly numbers with the steady recovery in the U.S. and Canadian economies. As a result, Boeinga™s quarterly revenue increased 2% year-over-year to approximately $17 billion, $212 million higher than the Zacks Consensus Estimate of $16.8 billion.

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