(Corrects third paragraph to say the analyst has revised his 2008 estimate on Wells Fargo to a profit of $2 per share. The analyst revised his estimate from a loss of $6.09 per share after the company informed him that a fourth quarter charge of $40 billion will be a balance sheet adjustment and will not flow through the income statement)
(Reuters) - Ladenburg Thalmann's Richard Bove cut his price target on Wells Fargo & Co
Shares of Wells Fargo were down 9 percent at $26.56 in afternoon trade on the New York Stock Exchange.
Bove expects Wells Fargo to post a profit of $2 per share in 2008, as the charge will not be reflected on the income statement. He also said, "In addition there is apparently another $11 billion in charges due to write downs that will not be shown on the income statement either."
The analyst said the bank's loan losses were rising because of weakness in the economy and margins were being stressed by the decline in asset yields.
Bove said Wells Fargo Chief Financial Officer Howard Atkins acknowledged at a presentation in New York that the bank would see a drop in margins.
"Wells Fargo's problem in this area is that it cannot cut deposit costs in the current environment while the markets continue to cut rates overall," the analyst said. He cut his price target on the stock by $3 to $37.
Bove said positive elements in the long term were that the bank had not stopped lending and was gaining market share. He expects the Wachovia deal to improve earnings when the economy stabilizes beginning in 2011.
"Wells continues to be the pre-eminent bank in this country at the moment with the best record. It is worth owning," Bove said, while maintaining his "buy" rating on the stock.
(Reporting by Adheesha Sarkar in Bangalore; Editing by Anil D'Silva)
