Morgan Stanley's Followup On Wells Fargo's Q4 Earnings

Morgan Stanley commented on Wells Fargo & Co WFC Thursday following the company’s Q4 earnings report.

Analysts led by Betsy L. Graseck noted that “Wells disappointed with an expense ratio rising to 59 percent – the top of their range and a high in five quarters,” and asked, “Is this a new trend or a blip?”

“While some costs like increased healthcare are more structural, many expenses were one time in nature (eg deferred comp). Given tough top line, expect WFC will moderate expense growth to keep its expense ratio within the middle of its 55-59 percent range,” according to Graseck.

The analyst note cited four take-aways from the earnings report: “1) 1Q15 mortgage optimism as originations expected to be at same level as 4Q14, despite seasonally slower purchase quarter. 2) Company comfortable with 59 percent expense ratio given level of investment, but expects lower level in 1Q15. 3) Still determining level of debt at hold co to raise for TLAC. 4) Energy a net positive as Wells more skewed to consumer than energy.”

The firm maintained a Equal-weight rating and $58 price target.

Wells Fargo & Co recently traded at $50.82, down 0.84 percent.