Author Topic: WFC - Wells Fargo  (Read 518900 times)

Junto

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Re: WFC - Wells Fargo
« Reply #1710 on: Today at 06:32:27 PM »
Given all of the scandal they have undergone the last 2-3 years, their steady hand a share repurchase has been shrewd and IMPRESSIVE.  They were repurchasing shares at an unbelievable pace.
Doesn't seem so shrewd to me. The vast majority of shares were repurchased at about $50, the share price today is less than half that. What's worse is that the share repurchase program is actually suspended at the moment, so no shares will be repurchased at these low prices.

Don't get me wrong though, Wells does looks cheap, but even before covid, it looked a bit like it was on the ropes (Q3+Q4 of last year were not good quarters). Q1 of this year was bad, Q2 will also be bad. The momentum of the business here does not look good, so I've swerved it and decided to buy Bank of America. It has a similar valuation, but doesn't have the Wily E. Coyote, falling off a precipice feel that Wells does with its recent earnings and revenue. With that said, Charles Scharf could be the guy to turn this thing around. Would not bet against him, but BAC seems the slightly safer bet right now.

WFC looks somewhat undervalued on P/B or P/E basis compared to BAC/JPM/UBS.
But seems to me extremely undervalued if you look at Mktcap/Total Asset.
I don't think the comparison are valid. BAC and JPM both have much larger investment banks attached to them.

Maybe WFC is more comparable in business model to USB, which is down more than 40% for the year.

That's actually a merger waiting to happen!  Cheers!

I think it is very unlikely that one of the big 3 banks ( WFC, BAC, JPM) will be allowed to do significant mergers with other banks in the near term future.

It wonít happen because it is against the rules. You canít do a merger when you are over 10% of deposits.


Mephistopheles

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Re: WFC - Wells Fargo
« Reply #1711 on: Today at 06:50:32 PM »
Can they do a merger with an IB? I think a WFC-MS tie up would be a perfect match. Pairing the deposit base with the brokerage operation. Like BofA Merrill.

Better for both companies to compete with JPM/BAC.

sundin

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Re: WFC - Wells Fargo
« Reply #1712 on: Today at 09:26:40 PM »
People always thrown around the NIM issue, make it look like we are at some crazy low NIM environment, but take a look https://fred.stlouisfed.org/series/USNIM, yes NIM is not the highest, but current NIM is not unprecedented. Sure you can argue itíll go lower, but will it? You can argue we will following Europe or Japan, I guess that is why (Along with potential write off that is supposed coming) the banks havenít recover much from March lows. But if banks goes so does a large part of the economy.

Isnít WFC NIM already significantly lower than that?

Why wonít the US follow Europe and Japan. Never understand why our banking system / economy is so special relative to Europe.

Banks donít have to go they just get a lower ROE in those scenarios. WFC still could be cheap with a 7% ROE and other stocks are just really expensive then in a relative basis.

1) Retail banks fund their lending largely through retail deposits which are considered to be stable and more resilient vs  wholesale funding that European banks were engaged in. This paper from BoC talks about Cdn bank resiliency to this regard https://www.bankofcanada.ca/wp-content/uploads/2017/05/boc-review-spring17-truno.pdf

2) US and Canada have one central bank. The EU represents a bunch of different nations. It's hard to get immediate funding action like we have had for covid and GFC. Quick monetary action makes banks stronger.

3) Lastly, USD is the reserve currency. Hard to see it have a negative rate like the EU.

1.  This has become somewhat worse in the US than it was historically.

2.  Good point, not sure how relative this will matter longer term.

3.  Why would the reserve currency not be able to have a negative rate?

I'm sure everyone has an opinion on this but I don't think the fed wants to get in a situation of offering interest credits and taking on more debt on its balance sheet. Also all this debt likely can't be paid back, but because its the reserve currency it can continue to roll over the debt in the hopes of inflating their way out of most of it.