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Topic: Growth Stocks

WELLS FARGO & CO. $49 – New York symbol WFC

WELLS FARGO & CO. $49 (New York symbol WFC; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 5.1 billion; Market cap: $249.9 billion; Price-to-sales ratio: 2.9; Dividend yield: 3.1%; TSINetwork Rating: Average; www.wellsfargo .com) earned $21.6 billion in 2015, down 1.0% from $21.8 billion in 2014. However, earnings per share rose 1.2%, to $4.15 from $4.10, on fewer shares outstanding.

Revenue gained 2.0%, to $86.1 billion from $84.3 billion. Low interest rates continue to spur demand for residential mortgages, business and car loans while encouraging consumers to make more credit card purchases. The bank also recently bought the commercial lending and leasing operations of General Electric (see page 18). Those businesses offer loans to help manufacturers boost their inventory, as well as other forms of financing.

However, Wells Fargo is earning less interest income on its loans, which hurts its earnings. Higher salaries and federal deposit insurance premiums also slowed its profit growth.

The bank set aside $2.4 billion to cover potential bad loans, up 75.1% from $1.4 billion in 2014. That’s mainly because in 2014 it took back $1.6 billion of the funds it had previously set aside for loan losses.

Wells Fargo is a buy.

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