Balanced View on Wells Fargo - Analyst Blog
March 07 2013 - 5:50AM
Zacks
On Mar 6, 2013, we reiterated our long-term recommendation on
Wells Fargo & Company (WFC) at Neutral based
on its diverse geographic and business mix. Moreover, the company’s
strategic acquisitions and solid capital position are expected to
improve profitability going forward. However, a protracted economic
recovery and pressure on net interest margin remain concerns.
Why Neutral?
Wells Fargo has achieved its 12th consecutive quarter of growth in
earnings per share by reporting earnings of 92 cents per share in
fourth quarter 2012. Results improved from earnings per share of 88
cents in the prior quarter and 73 cents in the year-ago quarter.
Also, it beat the Zacks Consensus Estimate by 5 cents.
Results at Wells Fargo benefited from improvement in top line,
aided by rise in all segments’ revenue. It also reported $250
million in reserve release (pre-tax), attributable to improved
portfolio performance.
However, the company experienced a rise in non-interest expenses.
Non-interest expense was $12.9 billion, up 6.6% from the prior
quarter. Further, regulatory issues as well as increasing demand
for mortgage buybacks added to its woes.
On Jan 22, 2013, Wells Fargo enhanced its quarterly common stock
dividend by 14% to 25 cents per share. The dividend was paid on Mar
1, 2013 to shareholders of record as of Feb 1, 2013. This marks
Wells Fargo’s 3rd consecutive year of dividend increase, reflecting
its commitment to return value to shareholders with strong cash
generation capabilities.
Following fourth-quarter 2012 results, the Zacks Consensus Estimate
for 2013 and 2014 has remained stable at $3.60 and $3.87 per share,
respectively, over the last 60 days. With the Zacks Consensus
Estimates remaining constant, the company retains a Zacks Rank #3
(Hold).
Other Major Banks to Consider
Among peers, BankUnited Inc. (BKU) holds a Zacks
Rank #1 (Strong Buy), while Fifth Third Bancorp
(FITB) and State Street Corporation (STT) retain a
Zacks Rank #2 (Buy).
BANKUNITED INC (BKU): Free Stock Analysis Report
FIFTH THIRD BK (FITB): Free Stock Analysis Report
STATE ST CORP (STT): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis Report
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