While Wall Street combs through Wells Fargo’s numbers (which unlike the rest of US banks is not just a glorified hedge fund and actually still lends out deposits, primarily to fund home loans) to find some glimmer of good news (judging by the stock price it hasn’t succeeded yet and won’t), there is just one number that is of particular significance: that would be $176.5 billion, or the amount of excess total deposits ($976.1 billion) over loans ($799.6 billion) as of Q4. This is an all time record delta (as is to be expected since the entire US financial system now has a $2 trillion excess in deposits over loans), and a dramatic inversion from the excess loans over deposits that marked the bank’s “Old Normal” balance sheet.
Why is this significant? Because as we have been showing in recent weeks, this excess funding is nothing but Fed reserve-facilitated (and repoed) prop trading capital – see JPM CIO.
Which begs the question: just what is Wells Fargo doing with this $176.5 billion in dry powder? Because if JPM used its $423 billion “deposit to loan gap” to fund a $323 billion internal prop trading book, does this mean that Wells is using some $120 billion or so to buy the stock of other banks, or ETFs that contain WFC stock in them?
We will only find out, if/when Wells too has a “Fail Whale” moment.
As for the other metrics reported by the bank, here are the main ones courtesy of Bloomberg:
- Wells Fargo 4Q home mortgage applications $152b vs $188b Q/q, application pipeline $81b qtr end vs $97b Q/q.
- Originations $125b vs $139b
- Residential servicing portfolio $1.9t
- Loans 90+ days past due (govt. guaranteed) $21.8b vs $21.4b Q/q; (ex. govt guaranteed) $1.4b end qtr vs $1.5b Q/q
- Provisions for loan repo losses $379m vs $462m Q/q
- Net MSRs $220m vs $142m Q/q on MSRs valuation adjs. made in 3Q for increased servicing, foreclosure costs
And, of course, Net Interest Margin, which is rapidly approaching zero, thank you ZIRP Bernanke.
Full Q4 earnings supplement from Wells: