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Wells Fargo Concerns Are Overblown

Summary

The earnings report of WFC indicates that the concerns over the company are clearly overblown.

Despite the concerns over slower interest rate hikes, the net interest income of WFC increased 6% in Q1 over last year.

In addition, the exposure of the company to the oil sector is well contained and easily manageable.

When the dust from the negative headlines settles, the stock is likely to be rewarded with a double bonus; higher earnings and a higher P/E ratio.

Wells Fargo (NYSE:WFC) has pronouncedly underperformed the market this year. To be sure, the stock has lost 10% while S&P (NYSEARCA:SPY) has gained 2%. The underperformance is merely the result of a wide range of negative headlines that are specific for the financial sector and the company, such as the slower pace of interest rate hikes, major losses due to the collapse of the oil price, new constraints due to the "too big to fail" designation and the downgrades from some analysts. However, the earnings report that was released yesterday indicates that these concerns are clearly overblown.

First of all, despite the concerns over slower interest rate hikes, the net interest income of Wells Fargo increased 6% in Q1 over last year thanks to the hike of interest rates implemented in Q1. The net interest income was also helped by the growth in...


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