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Citigroup: Wells Fargo May Cut Dividend in 2009

Thursday, 15 Jan 2009 08:50 AM

Wells Fargo may cut its dividend or raise capital in 2009, said a Citigroup analyst, who recommended investors not to buy into the stock "aggressively" in the near term citing deteriorating credit conditions.

Wells Fargo is one of the better managed companies in the bank sector, but due to deteriorating credit, investors can wait for a more attractive entry point, Keith Horowitz wrote in a note to clients.

Horowitz joins analyst Richard Staite of Atlantic Equities who on Wednesday projected that the San Francisco-based bank may need to raise $10 billion in capital and the sustainability of its dividend could be in question.

Citigroup estimates $110 billion in cumulative losses for Wells Fargo and said after the fourth quarter the company will have recognized 50 percent of the costs.

Management is unlikely to cut the dividend in the fourth quarter, as it would prefer to show the ability to pay it through this cycle, Horowitz said.

The analyst cut his price target on the stock by $2 to $23 and slashed his fourth-quarter profit view for the company by 72 percent.

Wells Fargo managed to outperform most of its larger peers last year by avoiding risky loans which had crippled profits at many financial firms amid the credit crisis.

Shares of the company closed at $23.07 on Wednesday on the New York Stock Exchange.

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