Reading some of the more bearish reports on Wells Fargo (NYSE:WFC), you'd almost have to wonder when the plague of locusts is due to arrive. Yes, the company's loan portfolio looks riskier to me than that of many of its peers, and yes, it is going to have a harder time growing interest income and improving its efficiency ratio in a lower-for-longer rate environment. But the company does seem to be handling its energy loans a little more aggressively than most, and Wells Fargo remains a growth-oriented bank with a very appealing deposit franchise.
My fair value estimates are lower, and I do think 2016 is going to be a pretty uninspiring year. Still, the shares look undervalued provided that you believe ROEs can approach the mid-teens again over the next decade and with underlying long-term earnings growth of around 5%. While I do have some credit/balance sheet concerns, the relative valuation may make Wells Fargo worth considering today.
Wells Fargo Slowed, But Not Broken