Wells Fargo: $7 Fee Winner

NEW YORK ( TheStreet) -- Wells Fargo ( WFC) was the winner among the largest U.S. banking names on Thursday, with shares rising over 3% to close at $31.39.

Once again, all eyes were on Europe, as Greece was expected to finalize its agreement with private bondholders over a discounted swap that could lower the country's debt by over 200 billion euro. Newswires reported that participation among investors had exceeded 75% late on Thursday. The debt restructuring is a required before Greece can receive a 130 billion euro bailout package.

The The KBW Bank Index ( I:BKX)

Wells Fargo's shares have now returned 14% year-to-date, following a 10% pullback during 2011.

The company stands out as the best and most consistent earner among the "big four" U.S. bank holding companies, with quarterly returns on average assets (ROA) ranging from 1.21% to 1.27% over the past year, according to data supplied by HighlineFI.

The shares trade for 1.7 times book value and 10 times the consensus 2012 earnings estimate of $3.20 a share, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is $3.69.

Reuters reported on Thursday that Wells Fargo was notifying customers in Georgia, New Jersey, Delaware, Connecticut, New York and Pennsylvania, that the bank's "Essential" checking account would no longer be free, but would have a $7 monthly service charge, unless customers kept minimum balances of $1,500 or had at least $500 a month in automatic direct deposits coming in.

A Wells Fargo spokesperson confirmed the Reuters report, and said the company expected 80% of its customers to avoid the new fees.

While Wells Fargo will obviously be dealing with some fee fallout over coming days, investors are eyeing an increased return of capital, which is expected after the Federal Reserve publicly announces the results of its annual bank stress tests next week.

The company is currently paying quarterly dividend of 12 cents a share, translating to a yield of 1.53%.

During the fourth quarter, the company repurchased 27 million common shares, with another 6 million in forward repurchases that were to settle during the first quarter.

Sterne Agee analyst Todd Hagerman said on Feb. 17 that he expects Wells Fargo to "take a more measured and balanced approach to capital redeployment going forward, suggesting a bias towards dividends versus share buyback at current levels." Hagerman added that his "scaled-back capital distribution assumptions (35% total capital distribution for 2012 vs. 43% following 3Q11) reflect our expectations that buybacks will likely receive the most scrutiny, oversight, and control (hence the reduced buyback expectations for WFC next year)."

Credit Suisse analyst Moshe Orenbuch on Feb. 9 said that following the stress tests, he expected "an increase in the quarterly dividend to $0.22 per share," for Wells Fargo, along with "a share buyback program of $3 billion."

Interested in more Wells Fargo? See TheStreet Ratings' report card for this stock.

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-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.