Friday, December 19, 2014

Wells Fargo: No Citi Lift Thanks to JPMorgan Downgrade

Following Wells Fargo’s (WFC) earnings report last week, shares of the U.S. banking giant fell 0.6% as investors expressed disappointment with the top-performing mega-bank. Wells Fargo is falling again today after the folks at JPMorgan slashed its rating.


JPMorgan’s Vivek Juneja and team explain why they cut Wells Fargo to Neutral from Overweight:

We are reducing our 2014 and 2015 EPS estimates to $4.15 from $4.21 and to $4.32 from $4.37, respectively, due to modestly higher expense run rate, lower fee revenue growth, and higher taxes. Wells has been the top performing bank in our universe, outperforming peers by about 700bp YTD, and with lower EPS estimates we see relatively less upside to the stock as it's close to our new price target. Wells faces more headwinds near term to its revenue growth initiatives leading us to lower EPS. Hence we are downgrading Wells Fargo to Neutral from Overweight. Wells Fargo remains one of the best run banks with industry leading ROA.

And so, shares of Wells Fargo slide today, despite the big boost provided to other U.S banking giant’s by Citigroup’s earnings today. Wells Fargo has dropped, even as Citigroup (C) has gained, JPMorgan Chase (JPM) has and Bank of America (BAC) has.

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