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April 21 (Reuters) - Oppenheimer & Co analyst Meredith Whitney downgraded Wells Fargo & Co (WFC.N) to "underperform" from "perform," saying the bank is under-reserved and will be forced to take reserve "true-ups" in excess of $4.5 billion in 2008 and potentially more in 2009.
Wells Fargo has been a long-time favorite holding of investors due to its consistency and continuity of results, but the fifth-largest U.S. bank's valuation can contract significantly in case of an unexpected reserve build, Whitney wrote in a note to clients.
The bank's first-quarter results reflected a "dangerous credit omen," Whitney said, cutting her 2008 estimates for Wells Fargo to $1.20 a share from $2.15 and to $2.00 from $2.15 a share for 2009.
Wells Fargo built reserves by $500 million, partly to account for future losses in its home equity portfolio that may decelerate losses for one quarter. Whitney, however, expects losses to rise materially going forward in the second half of 2008. (Reporting by Aditi Samajpati in Bangalore; Editing by Anil D'Silva)