Banking analyst Dick Bove upgrades Wells Fargo: 'I am convinced that the company will recover'

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A flag waves outside of a Wells Fargo bank branch October 3, 2008 in San Francisco, California.

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Wells Fargo will bounce back, according to Dick Bove, senior banking analyst at Odeon Capital.

The firm raised its rating on Wells Fargo to buy from hold, citing the bank’s “enormous financial strength.”

“I am convinced that the company will recover,” said Bove in a note to clients on Thursday. “The restructuring is likely to be successful.”

Wells Fargo has been undergoing an intense restructuring program since 2016 when news that employees at the bank had created millions of fake bank accounts to meet sales quotas severely damaged the reputation of the bank and drew scrutiny from regulators. Last year, the Federal Reserve capped the bank’s asset growth after Wells Fargo discovered more problems with customer dealings.

“Make no mistake, though, the bank is in a great deal of trouble,” Bove said, as he emphasized that Wells Fargo’s problems do not stem from “traditional areas.” However, even with a sizable number of government investigations, Bove said the fines will not be a problem for country’s fourth-largest bank.

For Bove, it is not a matter of whether to buy Wells Fargo’s stock, its a matter of when. He notes that earnings may not return to their pre-crisis levels until 2021 due to the restructuring efforts.

“While the timing of the upside is in question, I am no longer willing to try to guess at the optimum time to get in,” said Bove.

Shares of Wells Fargo are down more than 15% over the past 12 months, but have rebounded slightly this year up 5% since January.

Last month, shares of Wells Fargo fell as management warned of higher expenses through 2020, despite beating on the top and bottom lines of its quarterly earnings.

— with reporting from CNBC’s Michael Bloom

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