Wells Fargo (WFC): Reiterating Underweight Ahead Of Investor Day - PiperJaffray

Piper Jaffray analyst, Kevin Barker, believes there is a risk Wells Fargo (NYSE: WFC) could reduce its targeted gross capital payout ratio of 55-75% due to regulatory capital constraints and 1.3-1.6% ROA target due to elevated expenses at its investor day next Tuesday. The company is likely to continue showcasing its strong deposit base and industry leading lending platforms, while specifically addressing the company’s exposure to oil/ gas. No change to Underweight rating or $44 PT.

During the 2015 CCAR, WFC reported a minimum common equity tier 1 ratio (CET1) of 6.9% in the severely stressed scenario. The regulatory minimum for banks is 4.5% and we would expect most banks to maintain a ~5.5% level before looking to increase capital return to shareholders via buybacks or dividends. Considering WFC has seen its CET1 decline by 0.5% since the last CCAR and Fed governor Daniel Tarullo has stated the largest banks may see increased stress test capital minimums, we believe there is a risk that WFC could pull back on the amount of buybacks the company requests in the 2016 CCAR.

For an analyst ratings summary and ratings history on Wells Fargo click here. For more ratings news on Wells Fargo click here.

Shares of Wells Fargo closed at $47.62 yesterday.

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