NEW YORK ( TheStreet) -- Wells Fargo ( WFC - Get Report) was downgraded by Keefe, Bruyette & Woods late Monday on concerns a slowdown in refinancing activity will hit the bank's earnings harder than the market appears to be pricing in at the moment.

In lowering his recommendation to market perform from outperform, analyst Chris Mutascio, in part, cited the strong performance of the bank's shares in recent months.

Wells Fargo shares are up 19% since early February, compared to a 13% rise in the KBW Bank Index and a 7% rise in the S&P 500, according to Mutascio.

"The shares are now trading within 4% of our $43 target price. This limited upside potential no longer warrants our Outperform rating," he wrote in a note,

Also concerning, according to Mutascio, is the fact that long-term interest rates are rising while short-term rates remain low.

"Contrary to popular belief, bank earnings (including Wells Fargo's) are much more levered to higher short-term rates than they are higher long-term rates. We don't see this catalyst playing out for a long time to come. Higher long-term rates with no follow through in short-term rates could create an environment where the modest benefit to net interest income from deploying excess liquidity into moderately higher-yielding investment securities could be offset by lower mortgage banking income due to a drop in refinance volumes," Mutascio wrote.

-- Written by Dan Freed in New York.

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