WFC Q4 2010 Earnings

Banks have so much room to adjust their allowance for loan losses that saying any bank "beat" on the bottom line is not a fair statement.  I'll do another post on this subject.  For now I wanted to highlight a few items on the WFC report.

Revenue - it was said they beat but beat what?  Q4 2009 total revenue net of interest expense was $22,696 and for Q4 2010 was $21,494.  Last time I checked that would be a 5% decline in revenue.

Efficiency Ratio - just like JPM and C the trend with WFC is not favorable.  Q4 2010 had an efficiency ratio of 62.1% and in Q4 2009 was 56.5%.

Credit Quality - there's a disconnect somewhere (maybe it's me).  Asset prices are declining at an accelerated rate once the tax credit and other "free market" programs wore off.  Apparently WFC doesn't see any risk and have continually lowered their loan loss reserves as follows:

Q4 2009 - 3.13%
Q1 2010 - 3.2%
Q2 2010 - 3.2%
Q3 2010 - 3.1%
Q4 2010 - 3.0%

Granted these are not major reductions in loan loss reserves unlike JPM has but how can you be reducing loan loss reserves amidst falling asset prices?  Chris Whalen, arguably the best bank analyst out there said it best recently in a tweet "Jamie Dimon is making a bullish bet on housing."

WFC Q4 2010 Earnings