Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Why Wells Fargo & Co (WFC) Hit a New High This Morning

Page 1 of 2

It’s on a roll. Wells Fargo & Co (NYSE:WFC) was trading at $43.35 shortly before 11 a.m. EDT. Not only is this a 1.69% gain from Friday’s close, but it also sets a new 52-week high for the bank. While Wells has been viewed as the stalwart financial stock for the past few years, there are myriad reasons this bank is headed higher than ever. Below are three of them.

1. Earning well
Of course last Friday’s earnings report from Wells Fargo & Co (NYSE:WFC) is the top reason that investors are excited to be involved with the bank. Not only did it report both top- and bottom-line figures that beat analyst estimates, the bottom line was yet another record for the bank. Despite this, fellow Fool John Maxfield noted that the Wells earnings report reveals a much more nuanced performance for the bank, with a decrease in loan-loss provisions really propelling higher revenue for the quarter.

Wells Fargo & CoTop executives at most of the Big Four banks were outspoken about the effect of rising rates prior to the earnings season open. Wells Fargo & Co (NYSE:WFC) CEO John Stumpf and JPMorgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon were both quoted saying that new mortgage activity would likely decline because of the higher rates, but that eventually a normalized rate environment would be good for the banks overall. In the meantime, both have steered their respective insitutions though the volatile environment and presented record earnings.

The banks were under close watch this quarter, especially their mortgage-related operations, because of the ongoing Fed speculation and recent rise in interest rates. Wells Fargo & Co (NYSE:WFC) reported higher rates of both new originations and applications in the second quarter despite the rise in rates, but it was careful to point out that the pipeline of new applications was smaller as June closed out than the bank reported at the end of March.

2. Contrary to popular belief
The most recent data shows a continued drop in application activity for the housing market as a whole, with new applications down 20% in the most recent four-week period. But the drop has really been driven by lower activity in the refinancing segment of the business, which had been booming until the rise in rates occurred. As Maxfield noted in another piece, an unexpected rise in new purchase-money mortgages despite rising interest rates was reported by both Wells Fargo & Co (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM). The force behind the rise may be two-fold, with new buyers looking to lock in rates that are still historically low, and a new push from the banks to capture those opportunities after the refinance boom settled down.

Page 1 of 2
Loading Comments...