Wells Fargo Bank Shock The Street

So there is life after near death! Wells Fargo (WFC) stunned the street with a surprise $3 billion profit in Q1, vastly better than expectations.

The shocker was that charge offs from loan losses amounted to only $3.3 billion, a shadow of forecasts that ranged as high as $8 billion. Some analysts suspect that some creative accounting was involved in consolidating the losses from recently acquired Wachovia Bank (WB)..

Short sellers were seriously squeezed and no doubt are now speaking in voices several octaves higher, pushing the stock up an amazing 40%.

The news triggered an all out assault on bank haters, there are still plenty out there, taking JP Morgan up 24% and Bank of America up 42%. A share of Citigroup at $3 will now buy you a cup of coffee at Starbucks, but only if you get the cheap stuff.

With the Fed raining money down on the sector and the Treasury changing the rule book almost daily to make this work, how else was this going to play out? This puts WFC first in line to repay TARP money and get the Feds out of their hair. It also underlines the argument that I have been making all along that if you put mark to market and asset valuation issues aside (no easy task), the banking business in now the most outrageously profitable in its long history.