Tomahawk, WI 04/15/2014 (Basicsmedia) – Wells Fargo & Co (NYSE:WFC) beat estimates when it reported 14% rise in profits for 1Q2014. This was accomplished on the backs of many cost-cutting measures and some one-time gains.

Profits Up, Declining Revenues

WFC reported 1Q2014 profit of $5.9 billion, rising by 14% from 1Q2013. The EPS of $1.05 beat street estimates of $0.96. Revenue for 1Q2014 was down to $20.6 billion from $21.3 billion 1Q2013.

Profits from the community banking unit were up by about 31% to reach $3.8 billion. This was the seventeenth consecutive quarter of earnings growth reported by Wells Fargo.

Being the largest mortgage lender in the nation, Wells Fargo’s new mortgage originations are a bellwether for the U.S. housing market. New mortgage originations in 1Q2014 amounted $36 billion, a decline of about 28% from 4Q2013.

However, Wells Fargo & Co (NYSE:WFC)’s overall loan portfolio grew to $826.4 billion, rising by $4.2 billion compared to the same period last year.

Wells Fargo is well-placed compared to its peers in that it does not depend as much on fixed-income trading and other Wall St. activities that are under stress from new regulations.

Unlike Wells Fargo, JPMorgan Chase & Co. (NYSE:JPM) reported disappointing 1Q2014results.

Risky Loans?

As the community banking aspects grew at Wells Fargo, including checking accounts and auto loans, the good news aspect is that this is a signal of the growing confidence of customers in themselves and the economic outlook to take out new loans. The reverse side naturally is to be skeptical and to question whether Wells Fargo is lowering credit-worthiness requirements to increase its loan portfolio.

Squeaky Clean?

Whether WFC is squeaky-clean or not, it has moved farther from the financial crisis of 2008 compared to its peers. Citigroup Inc (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM) are often in the headlines for all the wrong reasons — a fraud in its Mexico unit for Citi and endless regulatory headaches for JPMorgan — while there is no ‘news’ on the Wells Fargo front and that is a good news.

Change Is Not Easy

Like all of its peers — some of whom have eliminated jobs while others have closed branches and some have done both — Wells Fargo & Co (NYSE:WFC) too has taken the tough decisions necessary to reduce expenses. It has cut 6,000 jobs just in the second half of 2013.

Thumbs Up To The Future

All gains are good — whether serendipitous or not. The economic outlook has been improving leading to lower credit losses of $825 million for 1Q2014 which was down 42% from 1Q2013. This gave the bank the confidence to release $500 million that it had been reserving to meet loan losses.

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