3. Wells Fargo

Company Profile

Shares of Wells Fargo & Co. ( WFC) of San Francisco closed at $29.04 Monday, returning 8% over the previous year. The company's quarterly dividend payout is five cents share, and KBW's David Konrad has forecasted the shares will yield above 4% in 2013.

Income Statement

Net income applicable to common stock for the third quarter was $3.2 billion, or 60 cents a share, increasing from $2.9 billion, or 55 cents a share the previous quarter, and $2.6 billion, or 56 cents a share, a year earlier.

The company said that earnings were boosted by a $650 million release in loan loss reserves, but that there was a "$380 million approximate negative impact from changes to Regulation E and related overdraft policy changes," as the company adopted the customer "opt-in" requirement for overdraft coverage on ATM and debit card transactions.

Wells Fargo's return on average equity for the third quarter was 11.05% according to SNL Financial.

Balance Sheet

Total assets were $1.2 trillion as of September 30 and nonperforming assets - including nonaccrual loans and repossessed assets - made up 2.83% of total assets.

Wells Fargo's Tier 1 common equity ratio was 8.01% as of September 30, according to SNL.

Stock Ratios

The shares trade for 10 times the consensus earnings estimate of $2.82 a share for 2011 and just 8 times the consensus estimate of $3.60 a share for 2012.

Analyst Ratings

Out of 25 analysts covering Wells Fargo, 18 rate the shares a buy, four analysts have hold ratings and three recommend investors sell the shares. Based on the mean price target of $35.47 among analysts polled by Thomson Reuters, the shares have 22% upside potential.

Marty Mosby of Guggenheim Securities has a buy rating on the shares with a $39 price target, saying the company's "low valuations are unsustainable," adding that "mortgage revenue is going to improve since refinance activity has picked up and there is earnings momentum from the consolidation with Wachovia, which continues to generate returns."

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