Jim Cramer says to buy Wells Fargo stock to capitalize on Fed rate hikes

CNBC’s Jim Cramer on Monday advised investors to add Wells Fargo to their shopping lists.

“Wells Fargo has now taken the lead as the best net interest margin in the group, and their multi-year turnaround plan is finally paying off. … This is by far my favorite name in this new leadership group,” a- he declared.

The bank beat Wall Street expectations for profit and revenue in the third quarter, although its profit was hurt by its decision to increase its loan loss reserves. Cramer said the most important part of the bank’s quarterly results is its net interest margin, which is the difference between what they pay for customer deposits and the return it gets from its investments.

The money Wells Fargo receives from that spread, known as net interest income, has “significantly exceeded” expectations, according to Cramer. The bank said earlier this year it expected net interest income growth of 8% from 2021 and raised that forecast to 24% on Friday.

“These guys are printing money thanks to the higher yield curve,” he said.

Cramer added that Wells Fargo’s net interest margin is better than its competitors, whose quarters he also summarized on Friday. Adding to his bullish case for the bank are his effective cost control measures, lack of exposure to capital markets and new M&A activity.

He noted that while bullish on the stock, investors should keep in mind that the Federal Reserve launched an asset cap on Wells Fargo in 2018, limiting the bank’s ability to grow.

“While it’s possible the cap will be lifted next year…we have no idea when that will happen, so I wouldn’t include it in your calculation,” he said.

Disclaimer: Cramer’s Charitable Trust owns shares of Wells Fargo.

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