Wells Fargo Is Ready to Roll

Careful mortgage lending practices helped the San Francisco bank avoid the problems plaguing large rivals such as Bank of America and Citigroup


Some of America's premier commercial banks, from Bank of America (BAC) to JPMorgan Chase (JPM), are still digging out from the 2007-2009 financial crisis, facing fat settlements and legal fees to resolve claims related to their mortgage portfolios that could yet cost billions of dollars. Not so Wells Fargo (WFC), the fourth-largest U.S. lender by assets, which is viewed by analysts as one of the commercial banks best positioned to sprint ahead.

Wells reported $12.4 billion in 2010 net income, beating 2009's number and placing it second in profits among the nation's largest commercial banks behind JPMorgan Chase. The San Francisco-based company moved into the top spot in mortgage lending in 2009, and held it last year, originating $386 billion in home loans as its main competitor, Bank of America, devoted more resources to working out troubled mortgages. "Wells is in a uniquely strong position to continue to outperform its peers," says Andrew Marquardt, an analyst at Evercore Partners (EVR) in New York. "They have weathered the storm far better than most."

Prodded by lawmakers, government-controlled mortgage companies Fannie Mae (FNMA) and Freddie Mac (FMCC) have pressed banks to buy back loans that were based on faulty data about homes and borrowers. Bank of America, JPMorgan Chase, and Ally Financial have settled in an effort to limit their liability. Bank of America paid $2.8 billion in December to end some repurchase demands.

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