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Shares of Wells Fargo closed at $30.63 Wednesday, returning 12% year-to-date. Based on a 12-cent quarterly payout, the shares have a dividend yield of 1.57%.
The company on Feb. 1 completed its purchase of UK asset-based lender Burdale Financial Holdings and the portfolio of Burdale Capital Finance from Bank of Ireland, for undisclosed terms, in a deal negotiated by Paul Hastings LLP.
O'Connor's price target for Wells Fargo is $36.00, and he estimates the company will earn $3.16 a share in 2012, followed by EPS of $3.77 in 2013.
Wells Fargo stands out among the "big four" U.S. banks, with the strongest and most consistent earnings over the past year. The company's return on average assets has ranged between 1.11% and 1.26% over the past five quarters, according to HighlineFI.
O'Connor says that Wells Fargo is "gaining share in mortgage, card, and capital markets," and is "willing to take risks to grow." The company has "gained share in mortgages" as other companies have pulled back, and "there's still a lot of room to grow credit card by penetrating its previously-acquired Wachovia markets."
Wells Fargo acquired Wachovia at the end of 2008, more than doubling in size.
O'Connor estimates that through a "meaningful expense savings plan," Wells Fargo is seeking to cut its quarterly expenses by $1.5 billion from fourth-quarter levels, by the end of this year.
Among risks to the shares, according to the analyst, is Wells Fargo's sheer size, and "robust scale in many core businesses, making it harder to move the needle through organic growth and M&A."
Interested in more on Wells Fargo? See TheStreet Ratings' report card for this stock.
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