Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Wells Fargo & Co (WFC), Bank of America Corp (BAC): Bank Stocks Are Still Cheap After This Year’s Gains

Page 1 of 2

Wells Fargo & Co (NYSE:WFC), the fourth largest bank in the U.S., has grown tremendously over the past few decades. In fact, over the past ten years alone, Wells Fargo’s total assets have nearly quadrupled, from about $388 billion to over $1.4 trillion. Additionally, Wells Fargo was one of the few major U.S. banks that actually came out of the financial crisis better than it went in, thanks to some very savvy moves that should produce better than average returns going forward. However, with shares up by more than 30% in the past year, is Wells Fargo still a buy?

A recent history of Wells Fargo

Wells Fargo & Co (NYSE:WFC) has been around since 1852, but did not begin its rapid growth until the 1980’s. Wells Fargo first entered the top ten U.S. banks in 1986 with the acquisition of Crocker National Bank. The company became number 9 with its acquisition of First Interstate Bancorp a decade later, and then became the 7th largest when it was acquired by Norwest Corporation which kept the Wells Fargo name.

Wells Fargo & Co (NYSE:WFC)

In one of the best deals to come out of the crisis, Wells Fargo & Co (NYSE:WFC) acquired Wachovia in 2008, which had been weakened by nonperforming mortgage loans. The purchase price of $23.1 billion was a fraction of Wachovia’s value just a few years earlier, and the deal added $707 billion to Wells Fargo’s balance sheet. Most importantly, it allowed Wells Fargo to significantly expand its geographic footprint and customer base, and it catapulted the company to the 4th largest U.S. bank, where it has remained ever since.

Numbers and projections

With some of the strongest fundamentals in the banking industry, the market has a generally high opinion of Wells Fargo. While mortgage banking revenues have slowed down a bit, the rise in interest rates that has occurred lately should help the bank’s net interest margin, and this trend will likely continue if rates rise going forward.

Wells Fargo & Co (NYSE:WFC) is expected to earn $3.71 for the 2013 fiscal year, which means that shares trade at just 10.9 times current year earnings. The consensus calls for the company’s earnings to rise to $3.90 and $4.13 over the following two years, for a three-year annual average forward earnings growth rate of 7%. Bear in mind that this could prove to be very conservative if interest rates begin to rise faster than currently expected. Also worth noting is that Wells Fargo & Co (NYSE:WFC) has successfully raised its dividend faster than virtually any other big bank after the crisis, and currently pays 2.9% annually, just shy of its payout before the crisis hit.

Bank of America: for those with a stronger stomach

Bank of America Corp (NYSE:BAC) was hit harder by the crisis, but that means that there is the potential for a stronger comeback for those investors willing to ride out the roller coaster ride in the meantime. With about $2.2 trillion in assets, Bank of America is the 2nd largest U.S. bank, but they have not quite recovered their pre-crisis stability just yet. Bank of America Corp (NYSE:BAC) just returned to profitability last year, after posting operating losses from 2008 through early 2011, and ended 2012 with a modest profit of $0.25 per share. In contrast, Wells Fargo & Co (NYSE:WFC) never had a losing year, and last year’s earnings of $3.37 per share are actually higher than the company’s best year before the crisis.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!