Based off of the results posted Tuesday by JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC),
this is shaping up as another low-to-no growth quarter for the larger
banks. Low rates are offsetting most of the benefits of loan growth, and
net interest leverage is coming more from shrinking the balance sheet
and reducing excess deposits, while expense reduction is not really
driving strong profit growth.
Wells Fargo needs higher rates
and/or a stronger economy to really thrive, but I think the bank is
well-placed for the realities of the market today. It is far less
complex than JPMorgan, Citi (NYSE:C), and Bank of America (NYSE:BAC)
and that will reduce its capital requirements, but it is large enough
to benefit from significant economies of scale in marketing and
distribution (cross-selling and the like). While I like the business and
have no issues with Wells Fargo as a core holding, the valuation
doesn't really argue for it as a must-buy today.
Continue here:
Wells Fargo Managing Through Low Growth
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