News

Wells Fargo shares go up after Wachovia buy, Citi reports loss

October 16, 2008

According to recent news reports from Reuters and The Associate Press, the market's financial instability has led to an improved outlook for one banking giant and a depressed outlook for another.

Reuters reported yesterday that Morgan Stanley upgraded Wells Fargo & Co.'s value and doubled its stock-price target after Wachovia's vie for the bank got final approval late last week, beating out Cit for the buy. Analysts expect Wells Fargo to raise $20 billion in capital to fund the deal. RBC Capital Markets raised its price target on Wells Fargo's stock to $35 from $32. On Friday afternoon, Wells' stock price listed at $33.84 on the New York Stock Exchange

Wells also posted a profit of $1.64 billion, 49 cents a share, for the third quarter on Wednesday. Citigroup Inc. on the other hand posted a $2.8 billion, 60 cents per share, loss for the third quarter, according to The AP. But the loss is less than the 70-cent per share loss analysts expected. The quarterly net loss included $4.4 billion in net pretax write-downs in Citi's securities and banking operations, $4.9 billion in net credit losses, and a $3.9 billion net charge to increase loan loss reserves. Citi also has cut its staff by 11,000 since the second quarter of 2008.

Citi on Sept. 29 had offered $2 billion, $1 a share, for just Wachovia's banking business. Four days later, Wells stepped in and offered $15 billion, $7 a share, to acquire the whole company.

Citi filed a lawsuit against Wells and Wachovia for violating an agreement it had signed with Wachovia. Last week, the Federal Reserve and the Federal Trade Commission both approved the deal between Wells and Wachovia. Citi backed away from the deal, but its suit against Wells has not been dropped.

Citi's stock on Friday afternoon traded for $15.39 on the NYSE.