Wells Fargo Shares Keep Sliding as Analysts See ‘Dead Money’

(Bloomberg) -- Wells Fargo & Co. shares are extending Friday’s declines in Monday pre-market trading, as analyst downgrades pile on after the bank lowered its net interest income forecast.

Firms cutting their rating on Wells Fargo stock to neutral include Goldman, BofAML and Buckingham. Shares are falling about 1.6 percent after closing down 2.6 percent on Friday, at the lowest since December 31.

Wells Fargo is “likely to remain ‘dead money’ and lag peers until there’s greater clarity around revenue inflecting,” Buckingham’s James Mitchell wrote in a note.

The bank’s “surprisingly weak NII outlook is a clear outlier versus peers and seemingly reflects further runoff of higher yielding assets and poor balance sheet positioning,” which likely pushes out its “revenue recovery story” to the second half of 2020 at the earliest. That’s even as “expense cuts are on target and there are signs of improvement around loan/deposit growth and other customer activity levels.”

BofAML’s downgrade to neutral comes as Wells Fargo’s “revenue base keeps eroding,” analyst Erika Najarian wrote in a note. It’s also “predicated on a lack of upside catalysts until a new CEO is announced.”

Other banks had gained on Friday after JPMorgan Chase & Co.’s first-quarter results beat and it maintained its outlook for net interest income, or NII. JPMorgan shares were up less than one percent in pre-market trading. Shares of Goldman Sachs Group Inc. and Citigroup Inc., which are due to report Monday morning, were rising in pre-market trading, while Bank of America Corp., which reports Tuesday, was gaining as well.

Read more: JPMorgan, Wells Fargo Spotlight Tale of 2 Wall Street Banks

To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm

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