Monday, April 25, 2011

Wells (WFC) Downgraded by Bove on Inflation Concerns

Wells Fargo (NYSE:WFC) was downgraded by Rochdale analyst Richard Bove, citing concerns over inflation and whether or not investors will dump the stock because of it.

Bove said, “The expectation is that inflation will grow slowly at first but then accelerate by the end of 2012 into 2013 and the United States may find itself with a 1970s problem. The initial rise in prices is likely to push interest rates and consequently bank earnings higher. Ultimately, if rates keep rising then the values on bank balance sheets will be questioned and it will be assumed that real book values are falling. Thus, banks will not be able to raise their asset values in the expected inflation they will see their asset values fall.”

Including the uncertainty surrounding the seemingly endless number of regulations that are strangling and threaten to destroy the banking industry, the low demand for loans and the rising costs of servicing mortgages, and you have a case for Wells Fargo remaining in limbo for some time concerning its share price.

Of course that's not much different than its peers, which it wouldn't be surprising to hear they're being downgraded as well.

Wells Fargo closed Thursday at $28.54, falling $0.29, or 1.01 percent. Bove lowered his price target on the giant bank from $39.50 to $32.50.

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