Shares of Wells Fargo (WFC) and Goldman Sachs (GS) were in the spotlight after Fox Business Senior Correspondent Charles Gasparino said via Twitter last night that speculation is growing about a possible merger between the two banks. In a research note to investors, JPMorgan analyst Vivek Juneja argued that the media speculation of a possible merger is "unfounded," noting that any bank acquisition by Wells Fargo is banned by law as the company already exceeds the 10% deposit market share limit.
SPECULATION GROWING: Charles Gasparino of Fox Business said in a series of tweets around the market close on Wednesday that "Bankers say merger speculation growing @WellsFargo will team w GoldmanSachs [...] High-level banker speculation combining a big commercial bank w top investment bank to compete w @jpmorgan. Wells CEO Charlie Scharf a close associate of Jamie Dimon. @DavidSolomon needs a deal $GS $WFC more as I get it"
MERGER SPECULATION 'UNFOUNDED': JPMorgan analyst Vivek Juneja told investors in a research note following Gasparino’s tweets that media speculation of a possible merger between Wells Fargo and Goldman Sachs is "unfounded." Any bank acquisition by Wells Fargo is banned by law as Wells already exceeds the 10% deposit market share limit, Juneja noted. Further, the analyst pointed out that any deal would be blocked by Wells Fargo's asset cap, which is already constraining its growth.
Juneja also expects that Wells Fargo's "numerous" legal and regulatory issues and recent rebukes by regulators for its lack of progress in remediating its consent orders will not allow for any deals involving the bank. The analyst, who has an Underweight rating on Wells Fargo, believes concerns about dividend cuts have recently weighed on the shares. Wells has the highest payout ratio among its peers, he added.
PRICE ACTION: In morning trading, shares of Wells Fargo have gained over 6% to $23.97, while Goldman Sachs’ stock is fractionally lower at $171.53.
Wells Fargo
+1.575 (+6.99%)
Goldman Sachs
-1.21 (-0.70%)
Morgan Stanley
-0.06 (-0.16%)
JPMorgan
+1.88 (+2.24%)