Wells Fargo Rises on Double Upgrade, Reported Yellen Nomination

Raymond James says Janet Yellen’s reported selection as Treasury secretary is a 'clear market and economic positive.'
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Wells Fargo  (WFC) - Get Report shares were climbing Tuesday after the banking giant was boosted by a double upgrade to outperform from Raymond James and President-elect Joe Biden’s reported nominee for Treasury secretary, Janet Yellen.

Shares of the San Francisco-based financial services company were up 8.19% to $28.45.

Other banking stocks, such as Bank of America  (BAC) - Get Report. JPMorgan Chase  (JPM) - Get Report and Citigroup  (C) - Get Report also were advancing.

If confirmed by the Senate, Yellen, a former Federal Reserve chair, would be the first woman to hold the position. 

Analysts were reacting favorably to the news. 

Raymond James analyst Ed Mills said Yellen’s selection is a “clear market and economic positive,” and points to a focus on economic recovery over regulatory policy.

Mills said that “more regulatory-minded Democrats” probably won’t oppose her selection as she’s overseen tough stress tests, levied enforcement actions against Wells Fargo, and supported the Fed’s restriction on buybacks and limitations on dividends in response to Covid-19."

Separately, Raymond James analyst David Long, who has a $32 price target on the shares, said he was upgrading Wells Fargo to outperform from underperform "as headwinds stemming from the account opening scandal that broke more than four years ago begin to rescind." 

The scandal centered on the creation of millions of fraudulent savings and checking accounts on behalf of Wells Fargo clients without their consent. 

With the worst likely in the past, Long said he now believes "that its pretax pre-provision income has troughed, revenue is nearing a bottom, a multi-year expense rationalization initiative can finally be taken on, and repurchase activity can return in the near future." 

"Altogether, we now see numerous positive catalysts for the bank in the near to intermediate term; thus, we believe the steep discount WFC shares trade at compared to peers on a Price to Tangible Book Value (P/TBV) basis represents an attractive entry point for investors," Long said.

Long also raised his 2020 earnings estimate by 8 cents to 21 cents a share, his 2021 estimate by 22 cents to $1.63, and his 2022 estimate by 18 cents to $2.78.

Earlier this month, the Securities and Exchange Commission charged former Wells Fargo CEO John Stumpf with misleading investors about the success of the bank's core business. Stumpf settled the charges without admitting or denying them and agreed to pay a $2.5 million penalty.