Wells Fargo Earnings: Record Income, Strong Mortgage Business, And Economic Implications

[First appeared on Seeking Alpha on July 16, 2012]

Wells Fargo (WFC) posted record net income of $4.6 billion in Q2 2012 as its loan book grew modestly and its mortgage business showed strong momentum. In a recent interview, Warren Buffett said that Wells Fargo should aim for $1 trillion of mortgage business (more on that below). With a strong capital position, Wells Fargo seems to be in a good position to benefit as the economy rebounds. In this update, we will look at Wells Fargo's Q2 2012 results to understand the underlying trends and continue our Q2 2012 earnings series that looks at the results of large-cap companies for clues about the general economy (see previous articles about Alcoa and JPMorgan). Following the market correction in Q2 and the reductions in company guidance and analyst projections over the last few weeks, we are interested in examining how large-cap companies are positioned for the second half of 2012 amid growing macro concerns.

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