CHESSNOID

What do you see with that headline? The trick to maintaining profits on falling revenues is simply a matter of laying off people. This is just another method to make it appear that things are going great when they aren’t aka smoke and mirrors. In a great economy when profit rises it is because revenues have increased. From this increased business will come more need to hire more employees. Funny how logic works.

What else can you monitor to determine whether a bank is sound or not? One must simply look at their portfolio of loans since that is how they make their money from fees and interest. Based on what I am reading, it supports the first situation mentioned above.

Marketwatch:

Total loans fell 4% to $751.2 billion from the year-earlier period.

But deposits grew. On average, Wells Fargo said checking and savings deposit accounts grew 9% from 2010’s first quarter.

On the credit-quality front, Wells Fargo released $1 billion from its reserve for future credit losses as loan recovery rates improved.

Net charge-offs for soured loans in the quarter were $3.21 billion, or 1.73% of total loans, compared with $3.84 billion, or 2% of loans, at the end of the fourth quarter. Nonperforming real estate and commercial assets fell 5% to $30.6 billion from the end of last year.

Wells Fargo said its net interest margin — a key measure of bank profitability — narrowed to 4.05% from 4.27% a year earlier.

Wells Fargo shares are struggling. Over the last 12 months, Wells Fargo shares are down 15%. The S&P Financials Index is off 4%.

So which people did they keep on their workforce? The loan modification department or what I like to call the collections department.

Wells Fargo also kept its ranks of financial advisors unchanged and maintained 16,000 workers to modify delinquent mortgages.

The company reported a profit of $3.8 billion, up from $2.6 billion in the year-earlier period. However, much of the gain could be attributed to setting aside less money to cover bad loans. Wells Fargo revenue fell 5.2% to $20.3 billion.

Investors were not pleased by the report. Shares of the stock quickly dropped by about 4% in trading this morning.