Earnings digest: Wells Fargo, Morgan Stanley, DB, Yahoo, and Boeing

I’m quite loaded so this is all I can atm.

Wells Fargo:

Wells Fargo& Co. posted $3.2 billion in third-quarter net income Wednesday on strong community-banking profits and mortgage banking investment gains, even as loan losses and heavily delinquent loans continued to rise quickly.

Wells Fargo increased its reserves by $1 billion during the quarter after it took permanent losses of $5.1 billion from defaulted loans.

The bank booked $3 billion in mortgage banking revenue, helped in part by high numbers of mortgage refinancing, through which Wells Fargo earns a fee for writing mortgages and selling them to government agencies.

Wells Fargo also posted $1.5 billion in one-time gains from investments tied to its mortgage servicing rights. Mortgage servicing rights fluctuate in value as interest rates change and banks often purchase hedging securities to offset swings and smooth earnings.

Morgan Stanley:

Morgan Stanley on Wednesday reported its first quarterly profit in a year, led by a rebound in income from underwriting debt and equity issues as well as an infusion of new revenues from its Morgan Stanley Smith Barney network of financial advisers.

The bank reported third-quarter earnings of $757m, a turnaround from a loss of $159m the previous quarter. Revenues jumped to $8.7bn in the quarter from $5.4bn the second quarter.

The US bank set aside $5bn for compensation expenses in the third quarter, up 28 per cent from $3.9bn in the second quarter. For the first nine months of 2009, Morgan Stanley has accrued $10.9bn in compensation, down 9 per cent from $12bn in the first nine months of 2008.

John Mack, Morgan Stanley’s chief executive, said in a statement: “Morgan Stanley continued to build momentum across our business this quarter.”

Deutsche Bank:

Deutsche Bank earned net income of €1.4bn ($2.09bn) in the third quarter to the end of September, Germany’s biggest bank said on Wednesday as it brought forward key details of its expected quarterly results.

Pre-tax profits at Deutsche Bank were €1.3bn in the quarter, the same as in the previous three months, with the bank saying expected tax credits would flatter net income.

The bank said its tier one capital ratio – a regulatory measure of balance sheet strength – had risen from 11 per cent at the end of the second quarter to about 11.7 per cent, suggesting that Deutsche Bank had continued to cut its risk-weighted asset base in line with a stated wish to bring down leverage following the financial crisis.

Yahoo:

Increased sales of display advertising helped Yahoo make a $188m profit, triple that of its third-quarter a year earlier, and prompted the company to raise projections for the next three months.

“Brand spending is starting to happen a little bit more,” said Tim Morse, chief financial officer. “We feel it’s loosening up.”

Net income rose more than expected, helped by the sale of a 1 per cent direct stake in Chinese e-commerce site Alibaba.com, and revenue fell less than expected.

The Alibaba.com sale contributed $98m to the quarterly net income of $188m, or 13 cents a share, up from $56.2m in 2008. Analysts had expected net of 7 cents. Revenue fell much less than expected, to $1.58bn from $1.79bn. That was flat with the second quarter.

Yahoo said it expected fourth-quarter revenue of $1.6bn to $1.7bn, up from $1.38bn at the end of last year, sending shares up more than 5 per cent in after-hours trading to $18.06.

Boeing:

The company reported a quarterly net loss of more than $1.5bn, missed Wall Street’s revenue expectations and slashed its annual profit forecast by more than half.

Delays on both the 787 and 747-8 have battered Boeing’s results and damaged the company’s credibility with investors and customers, including many of the world’s largest airlines.

Jim McNerney, Boeing’s chief executive, said on Wednesday: “As you’ve heard me say, we know we can and must do better on our development programmes.”

The 787 is the highly anticipated wide-body aircraft that claims much greater fuel economy than its predecessors, while the 747-8 is an updated version of the classic jumbo jet.

In the third quarter, missteps from the two programmes cost Boeing a combined $3.59 a share, or a total $3.6bn.

Boeing now expects to earn $1.35-$1.55 a share this year, down from a previous forecast of $4.70-$5.

Source: On Wells Fargo, on Morgan Stanley, on Deutsche Bank, on Yahoo, on Boeing

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