Goldman upgrades Wells Fargo, downgrades Citigroup, looks at recession scenarios

Oct. 03, 2022 8:51 AM ETWells Fargo & Company (WFC), CBy: Liz Kiesche, SA News Editor13 Comments

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Wells Fargo (NYSE:WFC) stock has gained 1.6% in Monday premarket trading after Goldman Sachs analyst Richard Ramsden upgraded the bank to Buy from Neutral due to its revenue upside, efficiency improvement from rates, loan-growth-fueled net interest income, and expense reductions.

At the same time, he downgraded Citigroup (NYSE:C) to Neutral from Buy as Ramsden expects the bank will need to build more capital than its peers and offer less operating leverage. Citi stock has slipped 0.6% in premarket.

He commented on Wells Fargo (WFC): "In a recessionary scenario, we see WFC as having less credit risk downside than peers given below average loan growth in recent years and less credit card skew."

As for Citi (C): "Despite substantial progress in 2Q22, C still needs to build capital, which delays the resumption of buybacks into 2023E and also potentially could impact revenue, as C limits RWAs (risk-weighted assets), growth," Ramsden wrote. In a recession scenario, he sees more earnings downside at Citi (C) than at its peers.

Ramsden's Buy rating on Wells Fargo (WFC) compares with the Quant rating of Strong Buy and agrees with average SA Authors' rating of Buy.

His Neutral rating on Citigroup (C) aligns with the Quant rating of Hold and contrasts with the average SA Authors' rating of Buy.

See why SA contributor IP Banking Research considers Citi (C) a compelling risk/reward opportunity

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