For months, Wells Fargo has been on the outs with investors, lumped in with the other delinquent banks that couldn't repay their government bailouts. The tide is turning, however, as Fargo plans to pay back $25 billion without diluting shareholders, and analysts have begun praising Fargo as the stable, sensible, and promising choice compared to its indebted peers, Citigroup and Bank of America.
Is this a sign of the overall happiness infusing the financial sector, building off a long run in the stock market and signs that the White House will let the surviving banks rule the field? Or are they exaggerating Fargo's prospects, failing to anticipate that last quarter's record profits might have been an anomaly?
- Emerging as the Dominant Player, says Brandon Clay at Seeking Alpha in a recommendation for the stock. "Wells Fargo is positioning itself for the new banking environment...The bank is using government stimulus and market momentum to expand. That's the right posture for this environment....Ride the wave in financials while you can. To go with one of the big brands in a revitalized banking sector, go with WFC."
- Pleasing Its Shareholders says Wade Hansen at Blogging Stocks. "The bank wants to repay the money without raising additional funds so it can protect its current share holders. And to that, I say bravo."
- But Profits Won't Last, says John Carney at Business Insider. Carney calculates how long it would take to pay back the massive gap in Fargo's capital if its profits--the best in 150 years--last until next year. Given that cheap money from the Fed and an empty playing field "may not last," Carney says "Those giant earnings from this year may become a thing of the past."
- Still Suffering from Acquiring Wachovia, says Felix Salmon at Reuters. "Wells Fargo is now far too big -- it has an astonishing $711 billion in US deposits, 11% of the total US deposit base -- and as a result it will be under intense regulatory scrutiny for the foreseeable future...its sheer enormity also leaves it vulnerable to calls from people like myself who think that all banks of its size should be broken up into less systemically-dangerous chunks."