Author Topic: WFC - Wells Fargo  (Read 242250 times)

rb

  • Hero Member
  • *****
  • Posts: 2481
Re: WFC - Wells Fargo
« Reply #680 on: February 09, 2018, 07:16:46 PM »
I highly suggest people familiarize themselves with banks' Basel 3 pillar 3 disclosure

Here is WFC's

https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/basel-disclosures/2017-third-quarter-pillar-3-disclosure.pdf?https://www.wellsfargo.com/assets/pdf/about/investor-relations/basel-disclosures/2017-third-quarter-pillar-3-disclosure.pdf

Starting on page 22, you can see their derivatives exposure...it is NOT fairly non-existent, smaller than BAC's and JPM's (40% of BAC's) but $19 B in RWA is pretty decent size imo.

I compare wfc, jpm and bac pillar 3 disclosures every quarter.
Ok, I was being a little glib when I said that Well's derivatives book doesn't exists. They're not only listed in the Basel pillar 3 disclosure. They're also in the notes to the financial statements.

First of all pulling the up the pillar 3 diclosures for WFC and BAC I observe that BAC has much less detail in their disclosure than WFC. BAC just gives you a total RWA and doesn't break down the categories like WFC does. Secondly pulling the Wells 10-Q I notice that the numbers are different between the two. I guess there must be some different standards for aggregating these. But since BAC doesn't break down their derivatives in pillar 3 I'll have to use financial statements to compare like with like. It's note 12 for WFC and note 2 for BAC.

This is how I look at this stuff.

Bucket 1: Interest Rates and Foreign Exchange. WFC=7.4 trillion BAC=34.4 trillion. Every bank will have tons of these and it's pretty simple and benign stuff. I'm not worried about these at all.

Bucket 2: Equity and Commodity. I'm a bit more concerned with these but not overly so. They're usually pretty well hedged. A floor may want to dial risk up or down a bit but it's usually at the margin. WFC=250 billion BAC=1.5 trillion.

Bucket 3: Credit Derivatives. This is the really scary stuff. WFC=30 billion BAC=1.2 trillion.

So yea Wells has 30 billion of the really scary stuff. But honestly that's pretty non existent on a 2 trillion balance sheet which is what I was getting at. Bank of America has 1.2 trillion of the scary stuff. Wells's total positions actually fit in the rounding error for Bank of America. Also if you move away and look at the total picture BAC dwarfs WFC in all derivative categories. All this while BAC has a similar sized balance to WFC.


Rasputin

  • Full Member
  • ***
  • Posts: 200
Re: WFC - Wells Fargo
« Reply #681 on: February 10, 2018, 06:26:01 AM »
While notional value is always scary, notional value does not equal possible losses.  We can't compare possible losses from derivatives across banks just by looking at notional value, because we don't know the detail of the banks trading positions.  This is my view.

The fed's view:

From 2017 DFAST

"the relative size of losses across firms depends not on nominal portfolio
size but rather on the specific risk characteristics of each BHCs trading positions, inclusive of hedges.  Importantly, these projected losses are based on the
trading positions and counterparty exposures held by these firms on a single date (January 3, 2017) and could have differed if they had been based on a different
date."

We are lucky that we have an independent 3rd party that goes through the GSIBs books and from my understanding, the fed rotates their stress teams, so no team work on the same GSIB every year. 

I use stress capital buffer (as defined by ex governor Tarullo) to see which bank loses the least/most % of capital in a severely adverse scenario.

WFC lost the least % of capital in 2015 and 2017 dfast, with BAC as runner up.  BAC had the lowest scb in 2016 dfast with WFC as runner up.

I prefer WFC's balance sheet vs BAC's (i wish BAC got the same consent order so they will shrink their trading book, worst part of their business), but it's a shame that WFC's management is still pompous even after the consent order.   

From today's Barron's:

Were the last bank, not the first bank, in the past 10 years to have gone through some sort of a breakdown that led to reputational damage that had to be worked through, Shrewsberry says. Its not a benefit to go last, but its not unique.

I view WFC as roughly 7-10% cheaper than BAC and I have been nibbling.

benchmark

  • Sr. Member
  • ****
  • Posts: 307
Re: WFC - Wells Fargo
« Reply #682 on: February 10, 2018, 08:03:22 AM »
While notional value is always scary, notional value does not equal possible losses.  We can't compare possible losses from derivatives across banks just by looking at notional value, because we don't know the detail of the banks trading positions.  This is my view.

The fed's view:

From 2017 DFAST

"the relative size of losses across firms depends not on nominal portfolio
size but rather on the specific risk characteristics of each BHCs trading positions, inclusive of hedges.  Importantly, these projected losses are based on the
trading positions and counterparty exposures held by these firms on a single date (January 3, 2017) and could have differed if they had been based on a different
date."

We are lucky that we have an independent 3rd party that goes through the GSIBs books and from my understanding, the fed rotates their stress teams, so no team work on the same GSIB every year. 

I use stress capital buffer (as defined by ex governor Tarullo) to see which bank loses the least/most % of capital in a severely adverse scenario.

WFC lost the least % of capital in 2015 and 2017 dfast, with BAC as runner up.  BAC had the lowest scb in 2016 dfast with WFC as runner up.

I prefer WFC's balance sheet vs BAC's (i wish BAC got the same consent order so they will shrink their trading book, worst part of their business), but it's a shame that WFC's management is still pompous even after the consent order.   

From today's Barron's:

Were the last bank, not the first bank, in the past 10 years to have gone through some sort of a breakdown that led to reputational damage that had to be worked through, Shrewsberry says. Its not a benefit to go last, but its not unique.

I view WFC as roughly 7-10% cheaper than BAC and I have been nibbling.

Have you sold some of your BAC? I remember that you were really bullish on BAC....

gary17

  • Hero Member
  • *****
  • Posts: 1116
Re: WFC - Wells Fargo
« Reply #683 on: February 10, 2018, 08:25:39 AM »
interesting. thanks
i have been tempted to buy some WFC too ; i gather it is cheaper but hard for me to know if its cheaper for a good reason the  damage to the brand ...  is that a permenant thing i wonder.   

While notional value is always scary, notional value does not equal possible losses.  We can't compare possible losses from derivatives across banks just by looking at notional value, because we don't know the detail of the banks trading positions.  This is my view.

The fed's view:

From 2017 DFAST

"the relative size of losses across firms depends not on nominal portfolio
size but rather on the specific risk characteristics of each BHCs trading positions, inclusive of hedges.  Importantly, these projected losses are based on the
trading positions and counterparty exposures held by these firms on a single date (January 3, 2017) and could have differed if they had been based on a different
date."

We are lucky that we have an independent 3rd party that goes through the GSIBs books and from my understanding, the fed rotates their stress teams, so no team work on the same GSIB every year. 

I use stress capital buffer (as defined by ex governor Tarullo) to see which bank loses the least/most % of capital in a severely adverse scenario.

WFC lost the least % of capital in 2015 and 2017 dfast, with BAC as runner up.  BAC had the lowest scb in 2016 dfast with WFC as runner up.

I prefer WFC's balance sheet vs BAC's (i wish BAC got the same consent order so they will shrink their trading book, worst part of their business), but it's a shame that WFC's management is still pompous even after the consent order.   

From today's Barron's:

Were the last bank, not the first bank, in the past 10 years to have gone through some sort of a breakdown that led to reputational damage that had to be worked through, Shrewsberry says. Its not a benefit to go last, but its not unique.

I view WFC as roughly 7-10% cheaper than BAC and I have been nibbling.

Rasputin

  • Full Member
  • ***
  • Posts: 200
Re: WFC - Wells Fargo
« Reply #684 on: February 12, 2018, 05:32:23 AM »
BAC is roughly 70% of my portfolio.  At one point in 2016 it was 125% of my portfolio. 

I think it's more likely than not that WFC's reputation will recover though it might take 3-5 years for WFC to be rid of this issue.  WFC's community banking still grew deposit by 4% from Q4 2016 to Q4 2017.

Anybody remembers this?

https://www.forbes.com/sites/halahtouryalai/2011/10/04/senator-durbins-reckless-message-to-bofa-customers-find-a-new-bank/#546412b99dfa

https://www.reuters.com/article/us-bank-of-am-capitalresubmission/bofa-suspends-buyback-div-increase-after-capital-error-idUSBREA3R0R920140428

SlowAppreciation

  • Sr. Member
  • ****
  • Posts: 396
    • Slow Appreciation
Re: WFC - Wells Fargo
« Reply #685 on: February 13, 2018, 11:34:37 AM »
Short thesis on CACC, with lots of mentions of WFC: https://www.plainsite.org/realitycheck/cacc2.pdf

AzCactus

  • Hero Member
  • *****
  • Posts: 568
Re: WFC - Wells Fargo
« Reply #686 on: February 14, 2018, 01:13:12 PM »
Pretty funny hearing Charlie defend Wells Fargo. 

nkp007

  • Hero Member
  • *****
  • Posts: 515
  • https://twitter.com/crowdturtle
Re: WFC - Wells Fargo
« Reply #687 on: March 16, 2018, 02:10:23 PM »
https://www.wsj.com/articles/justice-department-widens-wells-fargo-sales-investigation-to-wealth-management-1521215076

The Justice Department and Securities and Exchange Commission are conducting the investigation into the wealth-management business, these people said. Agents from the Federal Bureau of Investigation have been interviewing some wealth-management employees in the Phoenix area as recently as this week, some of these people said.


WFC likely needs CEO and top management. Political attacks won't stop until that happens. In addition, should help jolt the culture at the top (with an outside hire).

Viking

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1272
Re: WFC - Wells Fargo
« Reply #688 on: March 16, 2018, 03:10:24 PM »
It continues to surprise me how aggressive the government has been and continues to be with WFC. AIs WFC really so rotten to the core or is there something else going on?

The stock is trading at the same price it was trading at three years ago. Since that time, economic growth has been great, interest rates are much higher and expected to increase further (benefitting NIM) and tax reform has significantly boosted net earnings. Crazy.

CorpRaider

  • Hero Member
  • *****
  • Posts: 2010
    • The Corpraider
Re: WFC - Wells Fargo
« Reply #689 on: March 16, 2018, 03:21:21 PM »
I never liked Norwest, but maybe I will kick the tires if it runs back toward the lows.