Wells Fargo’s miracle profit faces doubts (again)

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Poor Wells Fargo & Co. One week after the bank stunned Wall Street by preannouncing a record first-quarter profit of $3 billion, its critics continue to allege that Wells’ earnings are a smoke-and-mirrors trick.

Jonathan Weil of Bloomberg News is the latest to accuse the San Francisco bank of accounting gimmickry. His analysis (read it here) in part rehashes what other Wells detractors have asserted, which is that the bank earned $3 billion in the quarter only because it failed to set aside a realistic sum for future loan losses.

But Weil also takes Wells to task for refusing to explain seeming discrepancies in the size of its capital base as originally disclosed for Dec. 31 and as stated in a company release in early March.

And he lashes out at Wells for refusing to provide more explanation for $44.2 billion in assets simply listed on its balance sheet as ‘other.’

Wells doesn’t have to play ball with Weil, but presumably the bank will provide more details about its first-quarter miracle profit when it fully reports results on Wednesday.

In the meantime, investors have backed away from the stock, albeit just modestly, since its 32% surge on April 9, the day of the earnings preannouncement. Wells shares closed at $19.45 on Thursday, down about 1% from $19.61 on April 9.

By contrast, the BKX index of 24 major bank stocks is up 6.4% since April 9.

-- Tom Petruno