Re: USB. I gather that they were more circumspect in their home mortgage lending.
From a 2/22 report:
Analysts have taken note of this cautious strategy, with Dick Bove of Punk Ziegel going so far as to tell investors in a note that U.S. Bancorp's main strength right now was that "these guys were not at all innovative in banking."
"[U.S. Bancorp] did not become involved with the capital markets activities of their peers," Bove said. "The net result is that few problems are being handed to the current management team. This is a huge benefit in today's markets."
Although Wells Fargo did warn that it added $1.4 billion to its credit reserves for losses it expects to incur from poorly performing home equity loans, its status as the nation's second-largest home lender has many analysts agreeing it dodged a major bullet in 2008 by avoiding riskier loan products.
"[Wells Fargo] has a 'sweet spot' given market consolidation and market share gains," Goldman Sachs Managing Director Lori Appelbaum wrote in a note to investors last month. The bank enjoyed a return on equity of more than 17% last year, the most of any of the nation's five largest banks.
Appelbaum noted the bank could see its shares rise as much as 15% over the next year, with the stock currently trading 11 times higher than her original estimate for 2008.
U.S. Bancorp, too, may be poised for gains as investors' general distaste for bank stocks causes them to overlook another solid franchise.
The bank's presence in 24 states allowed it to see even distribution of deposits in 2008, a recent report by Moody's Investor Services noted, with no single state accounting for more than 14% of total deposits. It saw stable earnings last year and maintained healthy market share, but perhaps most importantly, it managed to avoid problems associate with the subprime mortgage meltdown.
The Minneapolis-based bank has also raised its dividend several times in the last two years, most recently Jan. 15. End of Story |
