Wells Fargo: Still a Solid Foundation

04/26/2017 2:50 am EST


Chris Quigley

Contributing Editor, The Prudent Speculator

The media nightmare that accompanied the sham account scandal at Wells Fargo (WFC) continued to weigh on the financial giant via higher expenses in the first quarter of 2017, notes value investing specialist Chris Quigley in The Prudent Speculator.

In the first quarter, the bank earned an adjusted $0.98 per share, compared to the $0.97 analysts had expected. 

Although the company saw strong performance in commercial portfolios and consumer real estate portfolios, WFC’s efficiency ratio (a measure of a bank’s ability to convert revenue to earnings – the lower the number, the better) increased to 62.7% from 60.3% last quarter, an indicator that the company is feeling pressure from increased costs, lower revenue or both.

While WFC has been making progress realigning employee goals and refunding customers that were overcharged, the company is not out of the woods when it comes to rebuilding trust with the general public and with customers. 

On the other hand, we note that more than a few companies, especially in the financial sector, have overcome public relations disasters, and we expect WFC to emerge with a solid foundation for the future. 

Our Target Price for the stock is now $63, and we continue to think the stock is worth more than the current market quotation. Meanwhile, the shares yield 2.9%.

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