Interview: Wells Fargo---Atkins, Howard---Chief Finance Officer
>> wells fargo is one to have banks out with earnings today that said quarterly profit rose at the slowest rate in four days because of a jump in bankruptcy filings. for a closer look we’re joined by wells fargo chief financial officer howard atkins. always a pleasure to have you on.
>> good to be here.
>> some investors and analysts responding to your earnings report today, speculating that the bankruptcy issue is really a one-time problem. is that what you’re factoring in, and anything that we can see in coming quarters?
>> well, the bankruptcy issue really is a bit old news. we previously disclosed back in november what the impact was going to be, given the surge in accelerated bankruptcy filings prior to the october 17 change in law. it was seven cents and once you adjust for the seven cents, we had a really strong quarter.
>> in terms of, however, the consumer credit outlook, how is it looking in terms of what you’re anticipating for coming quart irs, how healthy are consumers right no?
>> again, as far as the fourth quarter is concerned, we had a strong quarter. consumer loans were up 15%. commercial loans were up once again for the fifth consecutive quarter. our top-line revenue, once you make the adjustment for the repositioning actions that we took on our balance sheet was up pretty strong. so we saw solid growth in the fourth quarter.
>> what are you anticipating for the coming quarters? in light of the fact that interest rates have been moving higher, people anticipated rates will move higher, how much did people and businesses accelerate their borrowing?
>> well, i think that the -- it’s hard to assess whether there was any accelerated borrowing. you know, we’ve seen pretty good borrowing throughout 2005, continued into the fourth quarter of 2005. perhaps moderated a little bit in some of the lendsing products brks in the aggregate we’re still very strong. we still continue to see good growth in our business because of our particular business model, which is focused on cross sell. so we pick up market share and benefiting from economic factors that are driving demand.
>> one thing we’ve talked about in previous quarters, which is how have you been positions yourself for those rising rates for what people anticipated would be the eventual slowdown in the housing market that we now seem to be seeing, tell us how that’s playing out for you right now.
>> we anticipated perhaps a year or two ago that the fed would raise short-term interest rates. we weren’t sure about the long-term masketses and we took a number of actions in anticipation of that and those have worked out extremely well for us. as far as general housing is concerned, you know, as we’ve side in the past, we have 80 different businesses atwellwell, which―in the aggregate, that gfs us built-diversification rate.
>> and in terms of that spread between those short and long-term rates, what are you positioning for in the coming months? we had that inversion a few times before the year ended. people watching how close those two rates are between the two and the 10-year. where do you think that’s going?
>> you know, anybody’s predick shups is as good as anybody else’s on that. we think the fed may stop at some point shortly and pause for a while and see what happens. but as i said before, in our business model, it almost doesn’t matter. our success as a company is coming from cross sell and we’ve been successful at doing that.
>> howard, one thing that was interesting in your earnings releases, you had a loss on the sale of $11 billion of debt in the quarter. were those mortgage bonds you were selling?
>> these were securities, largely mortgage backed securities. interest rates were volatile in the quarter and when they were low, we sold. we bought securities at higher rates, so we tried to take advantage of interquarter market volatilty, and particularly when we sell securities, we sell our lowest yielding securities which helps our future interest margin and asset yields. so we took some losses in the fourth quarter which we’ll have the benefit of helping if we replace those at higher yields.
>> do you think you’ll do more selling this quarter?
>> depends on volatilty and market opportunities.
>> where would you like to see that portfolio, how big?
>> you know, we have capacity to grow that portfolio, but that’s going to depend on what happens with the rest of the balance sheet. if we continue to get strong on commercial and consumer loan demand, we would prefer having the lending business, and those are the better long-term yields for us. that’s where we would like to concentrate. if opportunities are right, we’ll add to the portfolio.
>> howard, thank you very much. appreciate the time.
>> thank you.
>> have a great afternoon. oil surges to $66 a barrel, nearing early 1980’s prices when adjusted for inplakes. are we looking at higher prices? we’ll take a closer look.
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Interview: Majestic Research---Aiken, John---Analyst
>> welcome back to a very busy edition of “after the bell.” i’m ellen braitman. to breaking news right now, i should say news after the bell where guidant is concluding that the boston scientific offer is superior. keep in mind earlier today you had boston scientific come out with what it called a compelling offer, offering $80 a share, or the equivalent of $27 billion for guidant, the medical device company. guidant on friday had accepted an offer from johnson & johnson. that offer valued at $71 a share, or $24.2 billion. now guidant had a deadline of 5:00 p.m. today from boston scientific to accept or reject that offer. we had news “after the bell” that guidant is concluding that the boston scientific offer is superior. guidant must wait five days to january 25 under the johnson & johnson―this means that johnson & johnson has several days now to come back and basically respond to what guidant is saying. so, again, “after the bell” developing story that we’ll continue to follow for you in the hours and days ahead here on bloomberg television. in the meantime, we also have news “after the bell” from yahoo. yahoo out with its fourth quarter numbers, adjusted earnings per share of 16 cents, one cent shy of the average estimates. able lists had been looking for 17 cents. as for the revenue, excluding certain items, coming in at $1.07 billion, does match what analysts had been looking for. now, again, you’ve got the fourth quarter adjusted numbers at 16 cents a share, a penny shy of a average estimate. the company saying that fourth quarter fees revenue was $186 million. fourth quarter marketing services revenue at $1.32 billion. that is up 39%. it sees first quarter revenue, if you exclude certain items, at 1.04 to $1.1 billion. analysts were looking for $1.09 billion. so the top end potentially higher than the estimates. so first quarter revenue coming in at over $1 billion to $1.1 billion. analysts looking for closer to $1.1 billion. as for the international side for yahoo, the revenue up 47% to $445 million. as more yahoo shares, up 9% over the past year. with that, the shares are trading for 53 times 2006 forecast. and the company has been adding entertainment features, and encouragering users to post restaurant and product reviews, trying to create more space to display advertisements. so let’s get more right now on these results. here to break down the results for us is john aiken, senior internet analyst, at a new york based independent equity research fund. nice to have you with us.
>> thank you very much.
>> as for the missing by one penny. how significant is that for investors?
>> investors look at top line growth, so we tend to look at the top line. while we think the $1.07 billion, was in line with consensus, was slightly less than our expectation, it is slightly disappointing.
>> if you were looking for more than consensus or the average analyst estimate, where did you see the strength and perhaps the disappointment?
>> sure. the disapointment came in the marketing services line, which is made up of the branded advertising line. we’ve seen in our data of approximately―when we capture data, what i mean is we capture pricing of about 15,000 keyers on a daily basis and we’ve seen an uptick on the clicks on yahoo. and we had seen that uptick and expecting outperformance in the marketing services line.
>> where do you think they’re falling short? what are they doing right and what are they not doing enough?
>> the largest gap between yahoo and google is the montyization link. what we see on google is a much greater percentage of users actually conducting searches which they click on a link.
>> in terms of the shares, they had been―they had been down in the extended hours. what do you think we could see tomorrow?
>> we really don’t do price targets, but i expect that it would fall out into tomorrow.
>> in terms of the fact that we also had intel out after the close, there’s obviously perhaps going to be a fallout for technology in general tomorrow, how do you think they separate out that noise tomorrow that might be in the market ?
>> i think you’re going to see the rest of the internet companies much stronger. we’re expecting strong results for e-bay and google and amazon saw a significant surge near the end of the quarter.
>> why do you think that is?
>> what you’re really see is the gap between yahoo and google is a montyization gap.
>> and in terms of that international revenue being up 47%, how do you like those numb sners obviously, international is real important to google and to yahoo. how strong is that?
>> that’s a pretty disapointing number for them. largely speaking, people expect these companies to see stronger growth than that internationally. google will grow somewhere between 80% to 100% internationally.
>> and what are the key things to watch?
>> for yahoo specifically is how well they’re able to close the monetaryization gap.
>> john, thank you for joining us.
>> thank you very much.
>> john aiken of magestic research. we’re going to take a quick break. there’s been a surge in bankruptcy filings. coming up, we’ll speak to the c.e.o. of wells forgo.
