Is a Wells Fargo (WFC) Dividend Cut Imminent?

...one analyst at Atlantic Equities thinks so. He also believes that the large US bank could need to raise up to $10 billion following its acquisition of Wachovia.

Richard Straite downgraded Wells Fargo (NYSE: WFC) from Neutral to Underweight this morning, citing, in addition to the possible capital raise and dividend cut, an expected disappointing Q4 earnings announcement, which will be out on Wednesday, January 28.

The Atlantic Equities analyst believes that the Wachovia acquisition has degraded Wells Fargo's balance sheet from thee strongest in the financial sector to "one of the weakest". The analyst backs this claim up by pointing out that Wells Fargo's capital ratios have "deteriorated significantly" since the Wachovia acquisition: tangible common equity to risk weighted assets have fallen from 6.2% to 3.6%. And this is after Wells Fargo raised cash to help finance the purchase.

Shares of Wells Fargo are down 4.3% today, most recently trading at $23.36.

Wells Fargo & Company, through its subsidiaries, operates as a financial services company in the United States.

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