7/17T9:10 Stocks in the News

WFC Wells Fargo: Concerned that the co added leverage to its balance sheet and raised its dividend 10% in an environment where the more prudent step would be to conserve capital - FBR (27.23 ) -Update-
Friedman Billings notes WFC reported better-than-expected 2Q08, but their outlook for the co is not materially changed, as they expect continued elevated credit costs and a smaller contribution from mortgage and trading activities in future periods. WFC is highly profitable and has strong capital ratios, but firm is concerned that the co added leverage to its balance sheet and raised its dividend 10% in an environment where the more prudent step would be to conserve capital. Capital levels remain healthy, but firm would be more comfortable without growth in leverage or dividends. Firm reiterates their FY08 operating EPS est of $1.90 and adjust their 2009 est to $2.15 (from $2.20). Firm cuts tgt to $20 from $23.

WFC Wells Fargo: Downgrade details (27.23 ) -Update-
As mentioned at 6:23 UBS downgraded WFC to Neutral from Buy after 30% rally post 2Q results. The firm says fundamentals have clearly held up better than at most banks during this downturn, but the stock has now outperformed the group by more than 2500bps ytd. The firm thinks there may be more upside from here in WFC if they have seen the bottom in bank stocks, but macro uncertainties remain very high—and even if they get a faster than expected recovery, WFC may lag some of the weaker banks trading at lower valuations.