Is Wells Fargo Bank is in trouble, or is it solvent?

I want to know if Wells Fargo Bank is in trouble, or is it solvent?

Wells Fargo Bank is very solvent.  Wells Fargo was not as heavily involved in the risky subprime market a few years ago, meaning they do not have as many bad loans as a lot of the other lending institutions.  Most media outlets have Wells Fargo listed as one of the top banks in America. 

Wells is very solvent. They just wrote a check (not literally) for the acquisition of Wachovia.

Of the rapidly diminishing pool of lenders still open, I consider Wells to be the MOST solvent.

agreed, very solvent

Hmmm....I don't know about this guys.  If Wells Fargo isn't in trouble, why would they announce a 10 billion dollar stock offering to raise capital?  Maybe their bid for Wachovia is costing them a lot more than they bargained for?  Anybody have any thoughts on this? 

Didn't they just get 25b from the govt? (aka you and me)  Solvent

Wells is one of the 'too big to fail' banks. No way they approach that point regardless. At the same time, saying Wells didn't do much subprime is just incorrect. Aside from what they wholesaled, Wells had a pretty large subprime retail operation, as well as WF Finance which does subprime consumer lending.

Quick peek into their latest quarterly and their delinquent mortgage loans have increased 5 fold in the past year. Total chargeoffs have increased substantially as have loan losses. At the same time, loan loss reserves have only doubled, despite a 5 fold increase in delinquency. Like I said, I think Wells is safe in that they're 'too big to fail'. And given the influx of recent government money I think they'll be fine, but they've certainly got some heavy quarters of losses ahead of them.

AC

By the way, not pertinent to current condition... but a great article on the history of Wells subprime lending. Why they got in, how they operated etc. The article is dated (2004), but an interesting look at how one of the nation's top banks decided to get into subprime.

http://www.responsiblelending.org/pdfs/ip004-Wells_Fargo-0404.pdf

Antonio Cibella:

By the way, not pertinent to current condition... but a great article on the history of Wells subprime lending. Why they got in, how they operated etc. The article is dated (2004), but an interesting look at how one of the nation's top banks decided to get into subprime.

http://www.responsiblelending.org/pdfs/ip004-Wells_Fargo-0404.pdf

I'd say it is pertinent as some of the loans are surely still on their books...

excellent link :)

IMO, they are solvent, but not as solvent as they say they are...Merdith Whitney thinks so as well:

http://www.cnbc.com/id/15840232?video=920170651&play=1

in particular, around the 6 minute mark...

They are definitely solvent, but I am not sure if this purchase of Wachovia is going to help.  The selling of stock is what is bank rolling the purchase that is set to close at the end of this year.  Also, Wachovia had the biggest number of Option ARM loans, so guess who now has the largest number of Option ARM's.  They definitely did subprime, but they where much more conservative than a lot of lenders during the refi boom.

Don't believe everything you hear in the media.

The govt forced them to take the $25 billion of TARP money.  Plus they can use that money to make acquistions etc.  Actually if you look at the pay back it could be a beneift for a lender to use the TARP money even if they are completely solvent. 

I don't think wells is insolvent so much as ahead of the curve.  This was probably some sort of position taking as they watch those around them suffer.

If you look at the 3 biggest retail bank failures so far: wachovia, wamu, and indymac, all three had portfolios that differ significantly from wells.  Yes, wells had extensive alt-a and even sub-prime (can't attest to that being extensive, because I didn't use them), but no where near the level of option arms and other aggressive arms products.

Plus, I'm not sure of the numbers, but I'm under the assumption that they are not even in the same league as those who failed in terms of market cap, or depository accounts.  In other words, my thought here is not that they're too big to fail because they're integral to the financial system, but more like they're too big to fail...  Period.

I'm sitting next to Quinones in D.C. right now who is pulling up their 10q right now to confirm. 

He should be responding soon with his findings.