Wells Fargo & Co (NYSE:WFC): Still An Optimistic Buy

Boston, MA, 03/31/2014  (usastockreports)- Federal Reserve’s annual Dodd-Frank stress test is a big event in the US banking industry. Stress test for a banking institution gives out the scenario of how bank will perform under various stressed economic conditions. Under the adverse economic conditions if a bank will have sufficient capital to absorb the losses and perform robustly bank is deemed to have passed the stress test. Wells Fargo has performed relatively well in the stress test. Also Wells Fargo & Co (NYSE:WFC) is announced a partnership with American Express Company (NYSE:AXP), which would allow its customers to get AMEX credit cards by mid-2014.

Dodd-Frank Stress Test

Wells Fargo & Co (NYSE:WFC) has three major competitors in the U.S. banking industry according to their market capitalization; namely JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corp (NYSE:BAC) and Citigroup Inc (NYSE:C). Federal Reserve’s Dodd-Frank Act Stress Test 2014: Supervisory Stress Test Methodology and Results Wells Fargo’s lowest quarterly ratio from Q4 2013 to Q4 2015 in the severely adverse scenario is 8.2%. According to Federal Reserve Common equity ratio of 6% or more is considered ‘Well Capitalized’. Common Equity Ratios for JP Morgan, Citigroup and Bank of America are 6.3, 7.2 and 5.9 respectively. Along with the performance in the stress test Wells Fargo’s earning performance has also been good. EPS for Q4 2014 stood at $1.0 while the consensus of the street was $0.98. With earnings better than street estimates Wells Fargo is seen to perform better in upcoming time.

Credit Card partnership

Wells Fargo & Co (NYSE:WFC) last year announced a strategic partnership with AMEX where customers will be able to get AMEX card issued by Wells Fargo. Wells Fargo CEO John Stumpf said this was a part of Wells Fargo’s strategy to increase its credit card business. John said, “Our goal is to offer Wells Fargo customers a suite of cards that help them meet their financial goals. We’re proud to have American Express as a partner in this effort – a great company with a proven brand for customer service”. At year ending 2013 Wells Fargo reported that the company saw an increase of 9% in its credit card loan outstanding. The business is expected to contribute significantly in the bottom line for Wells Fargo.

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