On Aug 28, 2013, we maintained our long-term recommendation on
Wells Fargo & Company
) at Neutral, based on its diverse geographic and business mix,
strong capital base and cost saving initiatives. However,
regulatory issues coupled with fundamental pressures on the
banking sector are expected to dent Wells Fargo's financials in
the upcoming quarters.
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WELLS FARGO-NEW (WFC): Free Stock Analysis
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Wells Fargo achieved the fourteenth consecutive quarter of growth
in earnings per share by reporting earnings of 98 cents per share
in second-quarter 2013. Results improved from earnings per share
of 92 cents in the prior quarter and 82 cents in the year-ago
quarter. Also, it beat the Zacks Consensus Estimate by a nickel.
Results at Wells Fargo reflected growth in total loans and
deposits amid a challenging economy and prudent expense
management. Moreover, a strong capital position and returns on
assets and equity acted as positives. It also reported $500
million in reserve release (pre-tax), attributable to improved
However, a fall in non-interest income acted as a headwind for
the second quarter. The quarter's non-interest income came in at
$10.6 billion, down slightly on a sequential basis. Reduced
trading income including lower deferred compensation gains and
dip in other income were on the downsides.
Though the U.S. economy posted stable to improving economic data
during the first half of 2013, including favorable developments
in unemployment and housing, concerns about the outlook on the
global economy and continued political uncertainty persist.
Following second-quarter 2013 results, the Zacks Consensus
Estimate for 2013 increased 3.8% to $3.84 per share as all 21
estimates were revised higher over the last 60 days. For 2014,
the Zacks Consensus Estimate jumped 3.1% to $4.01 per share, as
18 of the 21 estimates moved north. Hence, Wells Fargo carries a
Zacks Rank #2 (Buy).
Other Major Banks to Consider
Besides Wells Fargo, other banks that are worth considering
) with a Zacks Rank #1 (Strong Buy), while
Fifth Third Bancorp
The PNC Financial Services Group, Inc.
) carry a Zacks Rank #2.