Analyst: Wells Fargo Still Struggling To 'Sustain' Core

In a report published Wednesday, analysts at Compass Point maintained their Neutral rating on Wells Fargo & Co (NYSE: WFC). The price target has been raised from $48 to $50. The company has announced its 1Q15 earnings largely in line with the estimate and consensus, when adjusted for the tax benefit during the quarter.

According to the analysts, "Core PPNR was in-line with our estimate at $8.8B as slightly lower NII and higher expenses were offset by stronger net gains on debt securities. The decline in NII to $11.0B from $11.1B after four consecutive quarters of growth was primarily due to a decline in asset yields and a significant increase in deposits."

This was the first quarter in the last two years that reserve releases were lower than estimated. This, the analysts believe, could suggest a change in reserve level trends. However, mortgage banking reported strong results, with mortgage production income up 27 percent in 1Q, along with robust refinance demand and a significant increase in application volumes.

The analysts expect the company to report strong 2Q15 results.