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Thursday February 14, 2013
Wells Fargo: 'Still cheap' among banks
by Richard Moroney, editor Dow Theory Forecasts Unlike many other financials, Wells Fargo (WFC) still looks cheap, trading at 10 times trailing earnings. The stock remains a Focus List buy. Wells Fargo expanded net income at all three of its segments last year. The bank’s results primarily rely on the activity of small business and consumers, rather than trading activities. Operating in all 50 states, the community-banking unit (54% of 2012 net income) sells mortgages and home-equity loans, as well as a variety of products geared toward consumers. In the housing market, buying activity and prices still look low relative to historical standards, suggesting the rebound may still have plenty of life left. Wells Fargo started 2013 with $81 billion in unclosed mortgages in the pipeline, up 13% from a year ago. Refinancing accounted for more than 70% of the mortgage applications Wells Fargo received last year. While the Federal Reserve doesn’t have much flexibility to lower interest rates further, the bank still sees hundreds of billions of dollars in refinancing op-portunities just in its own portfolio. Wells Fargo enjoys strong deposit inflows, with activity picking up in the December quarter. That influx, combined with low interest rates, put pressure on the bank’s profit margins. But Wells Fargo hopes customer relationships, first established with a simple checking account, will eventually translate into demand for its other financial products. Learn more about this financial newsletter at Richard Moroney's Dow Theory Forecasts. Related articles 
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