Wells Fargo expects community banks to suffer more with commercial mortgages - Minneapolis / St. Paul Business Journal:

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The San Francisco company's top brass told RBC analystt Joe Morford that they expecy Wells Fargo will benefit from its customert relationships and underwriting standards as the financial health of borrowers for commercialmortgages deteriorates, according to a researcg report that Morford shared with clients Commercial mortgages are beinf closely watched as another source of pain for the nation’e bankers. At the height of the credit one industry observer said commercialp real estate loans had become the crack cocains ofcommunity banking, reflecting the pace of growth some were achieving with such loans.
On the consumer Morford said Wells Fargo anticipatews that it can cover any rise in consumer credig losses from netinterest income. Many expecft banks will experience rising lossesa incredit cards, auto and othedr consumer loans as the recession deepens and unemployment rises. Morford also addresse d a frequent topic when it comes toWellsx Fargo: prospects for a cut in the dividend, now yieldinfg about 8 percent. “Wellxs seems unlikely to cut thedividenxd near-term, preserving it as a key component for long-term shareholdere returns,” Morford said.
But the analyst cut his 12-monthu price target on Wellws Fargo (NYSE: WFC) to $21 from $25 per share, reflectingv the general sell-off in financiakl stocks. The bank’s shares traded at the $16 level Friday. Morford remains optimistic on the bank’s long-term especially with the growthh potential in the recentlyacquired territory. “At this the 10 percent cost-savingzs projection looks conservative, and many potential revenue synergies seem realistic including opportunities to reprice deposits orimprovee cross-sell ratios and add sales capacit y at Wachovia,” Morford said.
“Furthermore, not only has customert retentionbeen better, but also Wells is gaining market