By Daily Crux Editor Sean Goldsmith:
Yesterday [Thursday], Wells Fargo announced that it expects to report a record $3 billion profit for the first quarter. The stock soared 31.7% on the news. This announcement may come as a surprise considering all the news surrounding banks recently has been so negative. But thanks to the government, banks are essentially paying nothing to borrow money… and can lend that cash for huge spreads.
In a press release, Wells Fargo said, "Business momentum in the quarter reflected strength in our traditional banking businesses, strong capital markets activities, and exceptionally strong mortgage banking results."
The announcement made Warren Buffett, whose Berkshire Hathaway is Wells' largest shareholder with 290 million shares, approximately $1.4 billion richer overnight.
And Buffett expected this to happen. As he told CNBC's Squawk Box:
"The spreads have never been wider. This is a great time to be in banking, you know, if you just get past the past and they are getting past the past. I mean, right now every time a loan is made to somebody to buy a house--and we're making, you know, making millions of loans--four and a half million houses will change hands this year out of a total stock of less than 80 million. So those people are making good mortgages. You want those assets on your books and you get a great spread in putting them on now. So it's a great time to be in banking, but you do have to get past this past."
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Buffett disciple who predicted financial crisis now going long
