Wells FargoMutascio reiterated his "market perform" rating for Wells Fargo, while raising his price target for the shares to $46 from $43. The analyst on Sunday also raised his 2013 EPS estimate to $3.91 from $3.74, and his 2014 EPS estimate to $4.15 from $3.93. KBW's price target for Wells Fargo represents "fail value" of 11 times the firm's 2014 EPS estimate, Mutascio wrote. FBR analyst Paul Miller on Monday reiterated his "outperform" rating for Wells Fargo, while sticking with his price target of $50. Miller raised his 2013 operating EPS estimate for the bank to $3.74 from $3.63, and maintained his 2014 EPS estimate of $3.90. Miller in a note to clients on Monday wrote "the company reported another quarter of solid mortgage-banking results as originations remain elevated and gain-on-sale declined less than expected." Wells Fargo also bucked the expected industry trend, with mortgage loan originations increasing to $112 billion during the second quarter from $109 billion during the first quarter. Hagerman maintained his "neutral" rating for Wells Fargo on Monday, although he raised his price target for the shares to $44 from $42. The analyst raised his 2013 EPS estimate to $3.85 from $3.65, while raising his 2014 EPS estimate to $4.10 from $4. Hagerman also introduced a 2015 EPS estimate for Wells Fargo of $4.40. In a note to clients, Hagerman wrote that his outlook for Wells Fargo "remains positive, but we see the shares now as largely fairly valued given our expectations for moderating growth, at least over the next few quarters."
Investors Have Rewarded Wells FargoThe considerably higher price-to-tangible-book and forward price-to-earnings ratios for Wells Fargo reflect a lower risk-profile, especially in the eyes of regulators and politicians still fixated on JPMorgan's "London Whale" hedge trading losses of at least $6.2 billion last year. Wells Fargo has also been a stronger overall earnings performer over the past several years. The company reported a 1.52% return on assets (ROA) for the first half of 2013, with a return on tangible common equity (ROTCE) of 17.22%, according to Thomson Reuters Bank Insight. JPMorgan reported an ROA for the first half of 2013 was 1.11% and a ROTCE of 17%. Wells Fargo's slightly lower ROTCE during the first half reflects the company's stronger capital position. The firm's tangible common equity ratio was 8.7% as of June 30, according to Thomson Reuters Bank Insight, compared to a ratio of 6.19% for JPMorgan. Over the past four full years, Wells Fargo's ROTCE has ranged from 14.89% to 16.95%, according to Thomson Reuters Bank Insight, compared to a range of 10.66% to 14.92% for JPMorgan Chase. JPMorgan has upped its game this year, with strong trading revenue during the second quarter and significant releases of loan loss reserves, but even CEO James Dimon agrees that the bank hasn't been much of a competitor with Wells Fargo in the mortgage lending business. But in his interview with Jim Cramer on Friday on CNBC, Dimon said "we
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