The answer has come in as to what happened to all the money that has been missing from the banking and credit sector. With banks and lenders dropping off radar and facing bankruptcy or company break-ups (see AIG), Wells Fargo has apparently been hoarding all the business and customer.

Citing its acquisition of Wachovia and spikes in mortgages, Wells Fargo announced Thursday (April 9) it expects first quarter earnings of $3 billion dollar when it reports next week. This incredible number was the leading catalyst for a 250 point surge in the Dow for its last trading day of the week, as markets are closed Friday for the Good Friday holiday.

Wells Fargo (WFC) stock jumped an incredibe 31.7 per cent following the news of record profits, to close at $19.61, a $4.72 gain on the day. In the current climate, all it takes is one company’s success to drive a whole sector higher. Citi did it a few weeks ago after it said it had been profitable the first two months of the year. After a stale week in finance sector trading, thanks to concerns about bad assets still held by some companies, the sector followed Wells Fargo higher.

Bank of America was actually the biggest winner after the Wells Fargo announcement, with a 35.3 per cent gain in its strock price. JPMorgan was up 19.4 per cent, and the aforementioned Citigroup climbed by 12.6 per cent.

Is the Wells Fargo news a sign of great things to come for the banking sector, and the economy, or is it simply a matter of one company doing things the right way and succeeding where others are failing? It could actually be a little bit of both. Wells Fargo is one of the few large companies that has not been terribly burdened by the failures in credit and mortgage businesses. Why? Because the company maintained a more conservative approach to lending while its brethren dived into ultra-aggressive sub-prime and risky loans.

Wells Fargo says it has been swamped with mortgage refinances as well as new mortgages in lieu of recently improving home sales. It has also been ahead of the curve in banking with regard to customer relationships. The company uses its Portfolio Management Account solution to offer its top customers great benefits in all its banking and loan products.

We’ll know more next week about whether some of the other companies in the finance sector have seen improvement. Most of the major banks are set to report first quarter earnings next week. Even a modestly successful week could drive stocks much higher, since the credit market has been one of the major catalysts of the economic struggles faced during the last year and a half.

Neil Kokemuller
10:37 PM EST
Thursday, April 9, 2009

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University.
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