Maybe there is such a thing as too much information.

When Wells Fargo & Co. released preliminary first-quarter results April 10, it raised eyebrows by not including details supporting anticipated loan-loss reserves.

On Thursday the $1.3 trillion-asset San Francisco company provided those details, but many eyebrows remained raised, wondering whether Wells reserved adequately for potential losses on massive amounts of risky loans, including option adjustable-rate mortgages, particularly those inherited from its Wachovia Corp. purchase.

Frederick Cannon, chief equity strategist at KBW Inc.'s Keefe, Bruyette & Woods Inc., said in an interview Wednesday that credit losses will likely accelerate, particularly if the recession extends into next year and unemployment reaches 12%, and that Wells should raise $50 billion of common equity.

"They currently have pretty strong reserves. However, the credit deterioration seems pretty rapid," with nonperformers rising 40% from the fourth quarter, to $12.6 billion, Cannon said. "I think they need more capital and more reserves, as I think the economy is going to deteriorate pretty rapidly."

Howard Atkins, Wells' chief financial officer, gave a different view, saying in an interview that it increased its allowance for credit losses 5.2% from the fourth quarter, to $22.8 billion, which now covers 2.7% of total loans and equals 2.2 times nonperforming loans.

Moreover, he said, the allowance should cover any consumer loan losses for at least the next 12 months and any commercial losses for the next 24 months.

"We think our allowance will cover projected losses," Atkins said. "Our thought is that the economy overall is still weak, but we think it may be closer to the bottom than it has been in a while."

Analysts looking beyond the adequacy of Wells' $4.6 billion first-quarter provision said the company may very well need to reserve further.

Joe Morford at Royal Bank of Canada's RBC Capital Markets stopped short of disputing the economic assumptions behind Wells' allowance, but he did say there were disconcerting trends in the details.

"I think problem loans are rising at a pretty good clip, and more of them are coming from CRE and C&I," Morford said. "While overall net chargeoffs declined in the quarter, the deterioration and the loss rates are concerning."

Besides Cannon, other analysts expressed concerns that Wells has not announced plans to raise additional capital, even to repay the $25 billion of government capital it received from the Troubled Asset Relief Program.

Paul Miller, an analyst at Friedman, Billings, Ramsey & Co. Inc., said Wells' capital needs could be around $40 billion, depending on the condition of the economy. "We think most banks need to raise additional capital — it isn't just Wells," Miller said in an interview. "The financial sector in general is undercapitalized, which is leading to a lot of the problems today."

Morford said Wells reported a "very strong level of pretax pre-provision profit," $9.2 billion in the first quarter.

That profit "will help them absorb higher credit costs over time," he said. Nevertheless, "it remains to be seen whether the regulators will go along with that or force them to raise capital."

Atkins said Wells can earn its way into more capital. "When we earn $3 billion in a quarter, like we just did, in effect we're raising capital every day," he said. As opposed to repaying Tarp funds, "our main focus is extending credit to help the U.S. economy, keep credit flowing and earn profits."

Wells' first-quarter net income climbed 19% from a year earlier, to $2.38 billion, or 56 cents a share, after the payment of preferred dividends to the Treasury Department and others.

Before paying preferred dividends, the company earned $3.05 billion. Total revenue nearly doubled, to $21 billion, including a record 16% increase in legacy Wells revenue.

The addition of Wachovia's operations generated about 41% of Wells' first-quarter revenue.

Wells' profit in large part reflected the company's torrid mortgage activity, three-fourths of which came in refinancings. The mortgage activity included $190 billion of applications and $101 billion of originations. The origination total was the company's highest since the refi boom of 2003.

Though refi activity can be unsustainable, Atkins said that with $100 billion of unclosed applications in the pipeline at the end of the first quarter — or 41% more than a quarter earlier — the company expects strong volume, even into next year.

"We hired 5,000 more people to process those applications, as this could continue for a long time," he said.

Jason Goldberg, a Barclays Capital analyst bullish on Wells, said mortgage activity will taper off when interest rates start climbing again.

"But the only reason that will happen will be if the economy is improving, and then we won't have to worry about a lot of things."

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