No wonder the market is up huge today. Before the bell, Wells Fargo (WFC) announced that it would earn a profit of $3 billion in the first quarter, making it the best quarter in the company’s history. Even more impressive, that result includes $372 million in TARP preferred dividends paid back to the government.
Some numbers from their press release:
Revenue $20 billion (+16%)
Pre-tax, pre-provision profit: $9.2 billion
Provision expense: $4.6 billion
Pre-tax profit: $4.6 billion
Net earnings: $3 billion
Allowance for future loan losses: $23 billion
Why isn’t the Wachovia deal killing them? As I have pointed out before, purchase accounting lets you write-off loans when deals close, so Wells was able to take most of the Wachovia losses up front, which boosts earnings in the future quarters. As we can see, this is the first quarter for the combined company and they are really executing well.
Full Disclosure: No position in WFC at the time of writing, but positions may change at any time