Analyst Ponders Whether Wells Fargo's Q3 Results Will Matter

Previewing the third quarter results of Wells Fargo & Co (NYSE: WFC), Barclays said investors will stay focused on further potential fallout from the recently disclosed sales practices investigation rather than the results, per se.

Earnings Miss On Cards

Analyst Jason Goldberg expects the firm to report third quarter earnings per share of $1, below the consensus estimate of $1.01. The analyst termed all the remedial actions taken by the company in the aftermath of the scandal as steps in the right direction. These steps, according to the analyst, will alleviate concerns over time. However, the analyst expects new regulatory inquiries and related lawsuits to pose a challenge.

Nevertheless, Barclays feels the wipe out $30 billion in market cap over the past month seems excessive. The firm feels the company's 3.4 percent dividend yield will provide support.

Related Link: Mike Khouw Sees Unusual Options Activity In Wells Fargo

Drivers For Sequential Performance

Barclays expects incremental net balance sheet growth, higher fee income, net lower core expenses, lower share count and a more normalized tax rate. However, the firm sees lower net interest margin, a marginally higher loan loss provision and unchanged reserve build.

Spotlight

The firm said it would watch for details on whether the sales practices investigation will alter the company's focus on cross selling and its ability to drive revenues, the net interest margin, which is under pressure, efficiency ratio target and return targets.

Barclays has an Overweight rating and a $58 price target on the shares of the company.

At last check, shares of Wells Fargo were down 0.74 percent at $45.31.

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