On Friday, Evercore ISI adjusted its outlook on Wells Fargo & Co (NYSE:WFC), reducing the price target to $65.00 from $67.00, while maintaining an Outperform rating on the bank's shares. The adjustment was made in response to an updated interest rate forecast and a more conservative projection for loan growth.
The firm has revised its earnings per share (EPS) estimates for Wells Fargo for the years 2025 and 2026, reducing them to $5.21 and $6.32 from the previous $5.67 and $7.09, respectively. The new estimates take into account a lower net interest income (NII) run rate based on the changed interest rate forecast and a cautious approach to loan growth expectations.
Evercore ISI now anticipates three interest rate cuts in 2024, specifically 25 basis points in September, November, and December. Additionally, the forecast includes four interest rate cuts in 2025, also at 25 basis points each, in March, June, September, and December. The firm noted that the consensus has not yet significantly adjusted to reflect the updated Federal Reserve view.
The revised NII estimate also reflects a slightly lower non-interest income tied to a more conservative investment banking and trading outlook. This is partly offset by a lower loan loss provision, which is attributed to the slower loan growth. The price target has been lowered from $67 to $65 to reflect the revisions in the EPS estimates.
In other recent news, Wells Fargo has been the subject of various developments. The financial firm's second quarter financial results led to Piper Sandler maintaining a neutral rating on the company's shares, citing concerns over lowered guidance for fiscal year 2024 net interest income and regulatory issues. Deutsche Bank (ETR:DBKGn), however, upgraded Wells Fargo's stock from Hold to Buy, stating that the bank's recent decline in share price presents a more attractive opportunity for investors.
In a strategic move, Wells Fargo has agreed to sell its non-agency third-party Commercial Mortgage Servicing business to Trimont, a deal expected to finalize in early 2025. The bank is also under investigation by the Consumer Financial Protection Bureau over the handling of customer funds on the Zelle Network (LON:NETW).
In the broader financial landscape, major brokerages, including J.P. Morgan, Citigroup, and Wells Fargo, anticipate that the Federal Reserve will lower interest rates in the upcoming months.
InvestingPro Insights
Wells Fargo & Co (NYSE:WFC) has been showing strong fundamental signals that could be of interest to investors. According to InvestingPro data, the bank's market capitalization stands at a robust $193.54 billion. Additionally, the bank has been trading at a low P/E ratio of 11.58, which is particularly compelling when paired with its near-term earnings growth prospects. The P/E ratio has seen an adjustment to 10.09 when considering the last twelve months as of Q2 2024, indicating a potentially attractive valuation for investors.
InvestingPro Tips highlight that Wells Fargo is not only a prominent player in the banking industry but has also maintained dividend payments for an impressive 54 consecutive years. This consistent dividend history is complemented by a dividend yield of 2.81% as of the last dividend ex-date on August 9, 2024. Furthermore, analysts predict that Wells Fargo will be profitable this year, a sentiment supported by the bank's profitability over the last twelve months.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available, including insights on share buybacks and gross profit margins. These tips can be explored further by visiting the InvestingPro platform for Wells Fargo at https://www.investing.com/pro/WFC.
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