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Bove goes from 'sell' to 'buy' on Wells Fargo

Upgrades

* Wells Fargo & Co.'s stock rating at Vertical Group was pushed up to "buy" from "sell" as analyst Dick Bove thinks the bank may be "set to close" the gap between its stock price's improvement and the S&P 500's.

Bove, in a Dec. 6 research report, argued that Wells Fargo has not only emerged "virtually unscathed" from its scandals, but possibly benefited from them. Having been forced to re-evaluate its operations, it "seems to have resolved most" of the problems and may finally "begin to pay attention" to its free-falling net interest margin.

The analyst thinks the bank may achieve more cost savings than it anticipates and has room to grow in investment banking. Wells Fargo also notably has significant scale in consumer finance at a time when "each of these markets are being stimulated by the increase in employment and slightly higher real wages," Bove wrote.

* BMO Capital Markets' Sohrab Movahedi on Dec. 5 raised Laurentian Bank of Canada's stock rating to "outperform" with a C$62 price target.

It had been "market perform" and C$57.

Montreal-based Laurentian reported fiscal fourth-quarter EPS of C$1.42, compared with the S&P Capital IQ consensus normalized EPS estimate of C$1.55. It posted the results Dec. 5, and the stock closed that day at C$56.00, down from the previous day's C$60.80. It continued to inch down Dec. 6, closing at C$55.27.

But the sell-off makes for "an attractive entry point for longer-term investors," Movahedi wrote, as the bank seems "on track" in terms of reaching efficiency and return-on-equity targets.

Industry report

* And Piper Jaffray analysts reported their takeaways from a discussion on Current Expected Credit Loss accounting.

Situs FIG co-Head Ed Robertson had emphasized, for example, that banks will need to use 15 to 20 years of their own loss histories to generate better-tailored loss projections, as opposed to using market data.

Robertson also projected that banks may end up potentially increasing reserves by 200 to 300 basis points and scaling down lending in areas, such as construction and development, where the historical data will include crisis-era charge-offs.