Rochdale's Bove Downgrades Wells Fargo (WFC) to Neutral
WFC Hot Sheet
Rating Summary:8 Buy, 3 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 16 | Down: 7 | New: 23
Rochdale Securities' new banking analyst, Dick Bove, issued a downgrade on shares of Wells Fargo (NYSE: WFC) earlier, cutting his investment rating from Buy to Neutral. Bove cited concerns that Wells Fargo's balance sheet could be getting "overextended" at these levels.
Bove notes that Wells Fargo currently bolsters a Tier 1 capital ratio of 8.28%, the lowest of all the US's major lenders. Further, Bove points to WFC's loan-to-deposit ratio, measuring the percentage of cash it has lent out, which currently stands at 103.1%, an indication that the bank is making new loans that hold long-term debt. Such debt could "eventually force Wells to cut back on lending", further damaging the condition of its sales model.
In order to pay back the Treasury's funds, and, eventually, continue being profitable, Bove believes Wells Fargo should concentrate on downsizing its balance sheet over the next several quarters.
Shares of Wells Fargo most recently traded at $20.49, down more than 4% from Friday's closing price.
Bove notes that Wells Fargo currently bolsters a Tier 1 capital ratio of 8.28%, the lowest of all the US's major lenders. Further, Bove points to WFC's loan-to-deposit ratio, measuring the percentage of cash it has lent out, which currently stands at 103.1%, an indication that the bank is making new loans that hold long-term debt. Such debt could "eventually force Wells to cut back on lending", further damaging the condition of its sales model.
In order to pay back the Treasury's funds, and, eventually, continue being profitable, Bove believes Wells Fargo should concentrate on downsizing its balance sheet over the next several quarters.
Shares of Wells Fargo most recently traded at $20.49, down more than 4% from Friday's closing price.
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