Wells Fargo & Co. is not an easy banking company to peg.

It lacks the drama of troubled Bank of America Corp. or Citigroup Inc., yet it doesn't command the confidence of a JPMorgan Chase & Co. It posted a strong profit in the third quarter, but questions linger about when it will repay its federal bailout money and when the Wachovia Corp. acquisition will pay off.

The picture that started to emerge Wednesday is of a company that, though still with plenty of issues, is making incremental progress thanks to strong revenue and improvements in credit quality.

Chief Financial Officer Howard Atkins cited those factors and others when saying a turning point seems to be in sight.

"At some point the cycle is going to turn favorably and the banks that are going to be the most successful are banks that are building their revenues today because those revenues will be there for a long time after the credit cycle begins to abate," Atkins said in an interview.

Wells' credit-quality woes could start to peak by next year, and loan demand could be finally "coming down the pike," he said. Business customers are at least beginning to talk about growing again, he said.

Nevertheless, Wells has not said when it plans to repay its $25 billion in Troubled Asset Relief Program funds. Atkins said the company would like to hold onto the money for now to keep capital levels high.

The $1.2 trillion-asset Wells Wednesday announced better-than-expected earnings for the third quarter because of strong revenue not only from mortgage activity but from other lines of business such as asset management, auto lending, consumer finance and wealth management. Analysts were also encouraged that chargeoffs and nonperformers rose at a slower rate, and could peak sometime in 2010, perhaps with consumer loans doing so in the first half.

Wells' management is comfortable predicting a peak in consumer losses as early as next summer, Atkins said, because the company has been tackling those problems for more than two years. As a result, the total amount of consumer loans past due 90 days declined from the second quarter, he said. Additionally, Wells' credit card portfolio is only 3% of total loans, so the company is much less exposed to credit card problems than some of its peers.

But the peak in commercial losses, particularly in commercial real estate, may take longer, and Atkins would only predict sometime in 2010.

"The industry overall is likely to continue to see higher CRE problems for some time, and will likely go up for another couple of quarters," he said.

But as credit losses subside, commercial loan demand may come back again, though Atkins stopped short of giving any definite time lines.

"When the economy starts to come back, banks will see more loan demand and we're beginning to see some signs of that," he said. "Businesses are starting to rebuild their inventories and they are starting to talk about capital expenditure programs, so you could see some more loans coming down the pike."

Analysts said that Wells' predictions for peaks in credit losses jibe with their expectations for big banks in general, provided the economy is truly recovering.

"In one or two quarters, I think we're going to be focused more on Wells' revenue generation and a return to normalized earnings as opposed to credit quality," said Raymond James & Associates analyst Anthony Polini. "Certainly they've convinced at least some skeptics that their credit quality is manageable and earnings growth potential is superior."

Polini estimates that Wells — like many in the industry — could fully return to normalized returns by 2012, and for Wells, that could mean around $5 a share.

However, not all analysts were as bullish on how fast Wells may get out of the woods. Paul Miller Jr., an analyst at Friedman, Billings, Ramsey Group Inc., said in a note to clients Wednesday that while Wells' $6.1 billion provision was below his team's expectations, "We believe the need for future outsized reserve builds could be a potential area of earnings-per-share pressure through 2010," he wrote. "The provision expense brings Wells' reserve to $24 billion or 3% of total loans."

Wells' earnings nearly doubled from a year earlier, to $3.2 billion. After paying preferred dividends, net income was $2.6 billion, or 56 cents a share — 19 cents above analysts estimates. Revenue was flat from the second quarter but nearly doubled from a year earlier, to $22.5 billion. Analysts said that Wells beat expectations mainly because they did not expect revenue from mortgage activity to be as strong as it was in the second quarter.

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