Is The Market Reading Too Much into Wells Fargo?
Wells Fargo, the fifth largest U.S. bank and the biggest bank on the West Coast, reported better-than-expected quarterly results and raised its dividend despite a 23 percent decline in profit caused by deteriorating credit.
Despite the decline in profits, the company nevertheless increased its quarterly dividend to 34 cents per share from 31 cents.
In reaction, Wells Fargo shares have rallied and were recently trading up 22 percent. In addition, many stocks in the battered banking sector also were trading higher.
Experts joined CNBC to share their insights on the future of the company, its decision to raise the dividend, and the banking industry.
Raising the Dividend
Wells Fargo has been hiring many people on the mortgage banking side when other banks have been letting people go, said Doug Dachille, CEO at First Principle Capital Management.
Dachille opposed the idea of the company raising its dividend.
“What is that shareholder going to do with the capital compared to what Wells could do with the capital to make money?” he said.
“Wells Fargo is in a better position than any other banks in the industry to take advantage of weakness among other players, not only to acquire, but also to gain market share though normal operations,” he said. (For more, see above video.)
--Doug Dachille, CEO, First Principle Capital Management
The Future of Banks
Wells Fargo is one of Bradley Vander Ploeg, a financial analyst at Raymond James & Associates, top picks in the banking sector, although he remains “highly cautious” about the banking sector.
“The loan portfolio composition of Wells Fargo is a bit different from other mortgage lenders,” said Vander Ploeg. “They’ve been able to cherry pick assets and keep them on their balance sheets and their mortgage portfolio is very high quality. So I wouldn’t necessarily say that this is the “all clear” sign for the industry.” (For more, see above video.)
--Bradley Vander Ploeg, financial analyst, Raymond James & Associates