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Barclays Upgrades Wells Fargo to Overweight on Fundamentals

'WFC stands to benefit the most of our coverage universe from higher interest rates,' wrote Barclays analyst Jason Goldberg.
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Barclays upgraded Wells Fargo WFC to overweight from equal weight Monday, citing higher interest rates and improved internal controls.

“WFC stands to benefit the most of our coverage universe from higher interest rates, while it has made significant investments in its control functions since its retail banking sales practice issues came to light,” Barclays analyst Jason Goldberg wrote in a commentary cited by CNBC.

Wells Fargo has suffered through years of scandals involving customer mistreatment.

“The eventual lifting of regulatory restrictions also represents a potential catalyst looking out,” Goldberg said.

Wells Fargo recently traded at $50.44, up 5%, and has soared 70% in the past 12 months. Goldberg raised his price target to $62 from $50.

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He likes the banking sector in general, naming Bank of America as his top pick.

“After meaningfully underperforming in 2020, large-cap bank stocks outperformed in 2021, rising 37% compared to the S&P 500′s 27% increase,” Goldberg said.

“We believe this outperformance can continue into 2022. We are above consensus earnings-per-share for the vast majority of our coverage for both 2022 and 2023.”

BofA recently traded at $46.40, up 4%, and has climbed 55% in the last 12 months.

Getting back to Wells Fargo, Morningstar analyst Eric Compton puts fair value at $55.

“All things considered, our long-term profitability outlook for Wells has not changed materially,” he wrote in October. “We still think expenses will be down in 2022 compared with 2021, and the bank seemingly has more excess reserves than its peers, which can be released over time.”