NEW YORK ( TheStreet) -- Saying the stock's valuation was "too attractive to ignore," FBR analyst Paul Miller on Tuesday upgraded his rating for Wells Fargo (WFC) to "Outperform" with a price target of $31.00.
Miller's target would be a 35% gain from Monday's closing price of $22.93. Wells Fargo's shares declined 9% on Monday, following last week's 9% decline.
Bank of America (BAC) led the largest U.S. banking names down, as its shares dropped 20% to close at $6.51. Miller continues to rate the nation's largest bank holding company "Outperform" with a price target of $12.00.
The analyst said that Wells Fargo was replacing PNC Financial Services (PNC) among his firm's "top picks" in the banking space, although PNC continues to be rated "Outperform" by FBR, with a $70 price target.Miller said the Wells Fargo upgrade "presumes that bank investors will flock to quality names that can best weather the adverse effect of a flattening yield curve," and that "the company's strong deposit franchise, diverse business lines, and solid mortgage origination platform position it well to sustain a healthy" net interest margin, with "77% of its funding base coming from core Deposits." A bank's net interest margin is the spread between a bank's average yield on loans and investments and its average cost for deposits and wholesale borrowings. The analyst also touted Wells Fargo's "decline in non-interest operating expenses, coupled with lower net interest income,
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