Smead, who also owns JPMorgan and Bank of America shares, said Wells Fargo's risk reward relationship compares favorably to large cap banking peers in a normal economy.
In addition to a careful eye on interest margins and loan growth, Stifel Nicolaus analyst Christopher Mutascio said the bank's efficiency ratio and reserve releases are an important investor issue. Recently, Wells Fargo abandoned an expense target of $11.25 billion a quarter for a ratio of between 55% to 59% of overall revenue, as a result of surging housing market and refinancing activity.
Mutascio expected that after reserve releases fell through 2012, the quarterly releases could stabilize at between $150 million and $200 million through 2013 and 2014.
Releases of $250 million beat estimates, while Wells Fargo's efficiency ratio, excluding one-time items, fell sharply to 54%. "We put the core operating efficiency ratio at 54%... This is a positive," wrote Mutascio, in a note assessing earnings.Given Wells Fargo's above industry average stock and earnings performance in recent years, some Wall Street analysts recently saw reason to downgrade their outlook for the bank, citing value at competitors Bank of America and Citigroup. Betsy Graseck, a banking analyst with Morgan Stanley downgraded Wells Fargo from 'Outperform' in late December, citing "less ability to improve
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