Magazine article American Banker

Stocks: Norwest Connection Gives Wells Watchers Confidence

Magazine article American Banker

Stocks: Norwest Connection Gives Wells Watchers Confidence

Article excerpt

By KAREN TALLEY Wells Fargo & Co., whose famous name had faded a bit, is beginning to look a lot like the old Norwest Corp. to some analysts.

Norwest, which last fall combined with Wells Fargo, "was one of the top performers in the industry," pointed out Sean J. Ryan, a banking analyst at Bear, Stearns & Co. "We believe the new Wells Fargo can sustain that performance."

But the new Wells Fargo has quite a legacy to live up to. Before the merger, Norwest was one of just 11 companies in the Standard & Poor's 500 with a compounded annual growth rate of 15% in revenues, 13% in earnings per share, and 15% in dividends.

The newly positive assessments by Mr. Ryan, as well as by George Bicher of BT Alex. Brown, run counter to sentiments by some other market watchers that Wells has been a bit too slow with crucial integration steps.

The pairing "is the one where the market may be overestimating the execution risk," Mr. Ryan said. The merger could well prove "to be among the most successful of last year's crop."

Shares of Wells Fargo and Co. closed at $37.4375, on Friday, up 68.75 cents.

Mr. Ryan thinks that within 12 months the shares could hit $52, or 20 times per-share earnings, which is around the multiple that Norwest shares once carried.

The "make-or-break issue for Wells' stock is whether Norwest can fix what went wrong at the old Wells or whether these problems will infect the old Norwest franchise," Mr. Ryan said.

The recent selloff in bank stocks "has created an attractive opportunity in the shares of Wells Fargo," Mr. …

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