Banking on Foolishness

The financial media reported that Wells beat earnings but they did not say HOW the company beat analyst estimates. Wells Fargo earned $1.8 billion in the last quarter beating analysts polled by Thomson Financial who expected earnings of $1.6 billion. The media conveniently left out that the company changed their policy of writing off home equity loans where payments were more than 180 days late, rather than 120, thus deferring $265 million in charge-offs. Subtracting the $265 million from the company’s earnings would have led to earnings of $1.535 billion, or 4.1% BELOW analyst estimates. Second, the company quadrupled its provision for loan losses, another tidbit that was conveniently left out on many CNBC segments commenting on the company’s earnings.