UPDATED: Wells Fargo Party

UPDATE 23:05 (21:05 GMT): copy from the story by Dow Jones News:
09 Apr 2009 22:06 EEDT DJ 2nd UPDATE:CREDIT MARKETS: Wells Fargo Provides A Boost
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But traders of banks' credit default swaps largely ignored the news and the rally in bank stocks. Quotes in new pricing conventions were flat from Wednesday, according to CMA DataVision.

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Forget the spin in the headline, but are the credit markets really dumb? OK, gone for long weekend ...

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ORIGINAL MESSAGE FOLLOWS >>>>>>>>>>>>>>
Roaring bulls jumping around the WFC shares today. The stock is up ca. 25% form the closing yesterday as I write now. The most bullish event of the day?

I am looking at the news story Wells Fargo Quarterly Profit Climbed to $3 Billion at Bloomberg, that tells me the following bull message:

April 9 (Bloomberg) -- Wells Fargo & Co., the second-biggest U.S. home lender, earned about $3 billion in the first quarter, exceeding the most optimistic Wall Street estimates and spurring a rally in bank shares on speculation that the industry is shaking off the global credit crunch.

Net income rose about 50 percent from $2 billion a year earlier, the San Francisco-based lender said today in a statement. Per-share profit fell to about 55 cents from 60 cents after the bank sold more than $12 billion of shares in November to help fund the purchase of Wachovia Corp., which Wells Fargo said is exceeding expectations. The stock jumped 27 percent.

but then my eyes move lower to the paragraph concerning charge-offs:

Profit before taxes and provisions was about $9.2 billion. Combined net charge-offs for uncollectible loans dropped to $3.3 billion, compared with $2.8 billion for Wells Fargo and $3.3 billion at Wachovia in the fourth quarter. Most of Wachovia’s charge-offs on real-estate loans are completed, Wells Fargo said.

Well, they have reduced the charge-offs by 2.8 billion ... happens!

Then I looked at WFC's 3rd qarter report in 2008 (without Wachovia), in October 15th, 2008 they were making credit reserve build of $500 million on assets that were slightly more than 2 tome less than at the end of 1st quarter of 2009. Today they announce 1.3 billion credit reserve build for the recent quarter ... assuming the 2 times of asset base, the build is only 20% higher than 6 months ago (it may be that the assets are 120% more, instead of 100% assumption in the calculation, than 6 months ago, should check)... well, in the 4th quarter of 2008 they made 4.2 billion credit reserve (OVER)build (or the only way to pass the auditors?)? ... as employment and general economic conditions improved during the 1st quarter, obviously for the bank. These crazy CDS spreads ...

By the way, if the WFC is right, then the FOMC should be fired, as they are incapable in judging economic and financial matters. What is Simon Johnson trying to achieve? Roubini has no clue anyway? Equity markets are saying "ALL RIGHT!"

Harrison at Creditwritedowns sounds bullish into the year end, but then there are the 4th quarter OVERbuild of credit reserves looming? CalculatedRisk is pointing to the fat margins, but that has nothing to do with risks ...