Wells Fargo: Financial Winners and Losers

(Updated with Wells downgrade, reports on U.S. pay czar limiting pay for bank executives and closing stock prices.)

NEW YORK (TheStreet) -- Wells Fargo (WFC Quote) was among the losers of the financial sector Wednesday after it was hit by a downgrade by a prominent analyst and reports surfaced about the U.S. government's plans to curb pay for top executives at some of its competitors.

Rochdale Securities analyst Richard Bove lowered his rating for Wells to sell Thursday afternoon, accelerating milder losses for the bank earlier in the day, after reporting a profit that beat Wall Street's consensus estimate. The stock closed down 5.1% to $28.90.

Also weighing on shares of some banks may have been reports that Obama administration pay czar Kenneth Feinberg planned to cap compensation for top executives at bailed-out banks like Bank of America (BAC Quote), Citigroup (C Quote) and American International Group (AIG Quote). The battered companies, along with automakers General Motors and Chrysler, were forced to go back to the government for second and sometimes third helpings of assistance.

Bank of America shares closed down 2.9% to $16.51. Citigroup shares shed a penny to $4.42 and AIG's stock took a 3.5% hit to $39.03. JPMorgan Chase (JPM Quote), which has repaid its TARP investment, lost 3% to $44.65.

Before the opening bell, the San Francisco-based bank reported a third-quarter profit of $3.24 billion, or 56 cents a share, coming in well ahead of the Thomson Reuters average estimate of 37 cents a share.

Wells Fargo said its current projections show credit losses peaking in 2010, with consumer losses potentially peaking in first half of the year and gradually declining, absent further economic deterioration. Its third quarter net charge-offs swelled, however, reaching $5.1 billion in the latest quarter, compared with second quarter net charge-offs of $4.4 billion.

However, Wells Fargo may have disappointed those who expected the bank to make some sort of statement about paying back bailout funds from the Troubled Asset Relief Program.

Morgan Stanley (MS Quote) also reported its third-quarter results early Wednesday. The bank notched a third-quarter profit of $757 million, or 38 cents a share. Revenue climbed 13% from a year ago to $8.67 billion.

On average, analysts were looking for a profit of 27 cents a share on revenue of $7 billion. Morgan Stanley shares pared steeper gains at the close, but rose on the beat, jumping by 4.8%, to $34.08.

Elsewhere on the earnings front, US Bancorp reported third-quarter earnings of $603 million, or 30 cents a share, exceeding the Thomson Reuters average estimate of 27 cents a share. Shares were rallied 2.7%, to $24.48.