Wells Fargo (WFC) Bull/Bear Cases
Tweet
Share
E-mail
Get Alerts WFC Hot Sheet
Price: $82.61 +0.78%
Rating Summary:
28 Buy, 20 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 9 | Down: 6 | New: 26
Rating Summary:
28 Buy, 20 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 9 | Down: 6 | New: 26
Join SI Premium – FREE
Deutsche Bank analysts have made their Bull and Bear cases on Wells Fargo & Co. (NYSE: WFC) going forward in 2011, a stock that the firm has a Buy rating and $36 price target on.
Shares of Wells Fargo are valued at $31.50 as of premarket trade on Monday.
Bull case arguments from Deutsche Bank on Wells Fargo:
Wells Fargo will see capital likely building quickly, as the firm has Tier 1 common under Basel 3 of roughly 7%. Deutsche Bank sees the capital generating from less of an impact from deductions over time. "We estimate capital of about 10% by the end of 2012. This presents WFC with opportunities to retire higher cost debt (and preferreds), add securities if interest rates rise, support loan growth and buyback stock."
The bank is well-positioned for growth of market share in areas such as mortgage, commercial lending and credit card given the benefits from the Wachovia deal, which are likely still to materialized.
Deutsche Bank also sees Wells Fargo seeing more potential offsets to NIM pressure. There have been some concerns over WFC’s NIM given less benefit from the accretable yield over time, reinvestment risk in WFC’s higheryielding securities book, and runoff of some higher yielding loans. However, we think WFC’s NIM will be more resilient over time given the funding mix should continue to improve...which could boost net interest income."
Bear case arguments:
Deutsche Banks sees NPA trend improving slowly as the firm expects to see more modifications over time and performing TDRs will remain high. "While NPAs appeared to stabilize and commercial inflows have declined over the prior quarters, overall NPA inflows rose by 5% in 3Q, which is somewhat concerning."
Wells Fargo could see higher real estate and home equity exposure as housing remains weak and related charge-offs represent over 50% of the firm's charge-offs. "We estimate there could be $1.5tr to $2tr of embedded loss in the U.S. related to residential real estate/home equity/CRE (and we’re more cautious on the home equity outlook than many). However, we believe WFC generally has a higher quality residential real estate book than Bank of America (NYSE: BAC) and Citigroup Inc. (NYSE: C).
Deutsche Bank sees potential risk to Wells Fargo from mortgage reform, as the second largest U.S. mortgage servicer would see an impact on profits from changes to the servicing model stemming from reform.
Shares of Wells Fargo are valued at $31.50 as of premarket trade on Monday.
Bull case arguments from Deutsche Bank on Wells Fargo:
Wells Fargo will see capital likely building quickly, as the firm has Tier 1 common under Basel 3 of roughly 7%. Deutsche Bank sees the capital generating from less of an impact from deductions over time. "We estimate capital of about 10% by the end of 2012. This presents WFC with opportunities to retire higher cost debt (and preferreds), add securities if interest rates rise, support loan growth and buyback stock."
The bank is well-positioned for growth of market share in areas such as mortgage, commercial lending and credit card given the benefits from the Wachovia deal, which are likely still to materialized.
Deutsche Bank also sees Wells Fargo seeing more potential offsets to NIM pressure. There have been some concerns over WFC’s NIM given less benefit from the accretable yield over time, reinvestment risk in WFC’s higheryielding securities book, and runoff of some higher yielding loans. However, we think WFC’s NIM will be more resilient over time given the funding mix should continue to improve...which could boost net interest income."
Bear case arguments:
Deutsche Banks sees NPA trend improving slowly as the firm expects to see more modifications over time and performing TDRs will remain high. "While NPAs appeared to stabilize and commercial inflows have declined over the prior quarters, overall NPA inflows rose by 5% in 3Q, which is somewhat concerning."
Wells Fargo could see higher real estate and home equity exposure as housing remains weak and related charge-offs represent over 50% of the firm's charge-offs. "We estimate there could be $1.5tr to $2tr of embedded loss in the U.S. related to residential real estate/home equity/CRE (and we’re more cautious on the home equity outlook than many). However, we believe WFC generally has a higher quality residential real estate book than Bank of America (NYSE: BAC) and Citigroup Inc. (NYSE: C).
Deutsche Bank sees potential risk to Wells Fargo from mortgage reform, as the second largest U.S. mortgage servicer would see an impact on profits from changes to the servicing model stemming from reform.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Camden Property Trust (CPT) PT Raised to $123 at Truist Securities
- BofA Securities Double Upgrades Intel (INTC) to Buy
- Dentsply Sirona names John Fortson as chief financial officer
Create E-mail Alert Related Categories
Analyst Comments, Insiders' BlogRelated Entities
Deutsche Bank, Citi, WachoviaSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
