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Wells Fargo's LeBron James Earnings Streak A Hidden Opportunity

Some Wall Street analysts are less excited about Wells Fargo's near-term earnings, even if most continue to highlight the bank as among the best managed in the financial sector.

"We believe Wells Fargo will face some revenue challenges in both net interest income and fee income. Mortgage banking (14% of total revenues) is expected to decline, margin is expected to be under pressure and loan growth is forecasted to slow," wrote Peter J. Winter, a BMO Capital Markets analyst, when initiating a rating on Wells Fargo with a $40 price target and 'market perform' rating in mid-March.

"Wells Fargo has a very diverse business model to offset some of the revenue challenges and we believe it will maintain its top-tier profitability metrics," added Winter, citing the bank's fee revenue and growing customer base among depositors and homeowners.

Raymond James analyst Anthony Polini gives Wells Fargo a "strong buy" rating and highlights a near 2% increase in loans, trading gains and a release of loan loss provisions as possible strengths for the bank in the first quarter. Polini forecasts a $350 million reserve release and a 6.3% decrease in charge-offs.

Risks to Wells Fargo's earnings include a possible net interest margin decline greater than 6 basis points after a 10 basis point fourth quarter decline disappointed investors in January, according to Polini. He also forecasts a slight drop in mortgage banking income to $2.8 billion and gives shares a $43 price target.

No doubt Wells Fargo will report strong first quarter earnings on April 12, which will be among the best in the U.S. banking sector.

The bigger question is whether the bank can continue a streak of earnings growth that may prove skeptics wrong and set the stage for another year of strong stock performance.

-- Written by Antoine Gara in New York

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