Rochdale’s noted banking analyst Dick Bove slapped a sell rating on Wells Fargo & Company (WFC) on Monday, citing an economic slowdown and an accelerating drop in operational earnings. Bove reduced Wells to “Sell” from “Neutral” and cut his price target on WFC shares by 33% from $32.50 to $22.00.
“If Tarullo is right [on Friday, Fed governor Daniel Tarullo suggested “systematically important financial institutions” may have to increase their capital beyond the Basel standards] and the Fed is really serious, it will have an unbelievably negative impact on banks and in my view the economy,” Bove told TheStreet. “It will require the top 20 banks to raise capital by at least 20%, about $350 billion worth, which they can’t do. They will be forced to shrink their balance sheet dramatically and to dump loans even quicker than they have been doing.”
Bove also said he is unimpressed with Wells Fargo’s operational effectiveness in the latest quarters. [TheStreet]: “Wells is not handling the environment particularly well. Loan loss provisions have been declining, but if you exclude that, operational earnings have been declining on a sequential basis every quarter and the pace has been accelerating. Revenues are down both on net interest income as well as non-interest income, while expenses are going up.”
The news hit Wells Fargo’s stock, sending it dropping nearly 3 percent to $26.08 Monday morning and leaving it down 13% on a y/y basis.
Wells has a market cap of $140 billion; its shares currently trade at around $26.56 with a t12 P/E ratio of 10.98 and P/S ratio of 1.53. The dividend yield of WFC stock is 1.82%.
The median Wall Street price target on WFC shares is $36.00 with a high target of $49.00.