Wells Fargo projects record $3 billion Q1 profit, lifts stocks

— -- Investors starved for good news from banks finally got a signal that the beleaguered industry might finally be leaving its worst troubles behind.

Well Fargo's results show that homeowners took advantage of low rates. The bank saw $100 billion in new mortgages in the quarter, with more than 450,000 people purchasing or refinancing homes. Mortgage applications rose 64% from the fourth quarter of 2008 to $190 billion.

"It's a good start," says Ben Wallace, analyst at Grimes & Co., which owns shares of both JPMorgan and Wells Fargo. But Wallace cautions that these results don't mean that the banks have engineered a turnaround yet.

That's because the economic downturn is still in full sway, and the credit markets aren't back to normal levels despite the government's massive injections of capital to stimulate lending. At the same time, losses from credit cards, construction and commercial real estate loans are starting to mount and could continue through 2010, says Mike Mayo, banking analyst at Calyon Securities.