Analyst Whitney Thinks Wells Fargo Needs Reserves, Capital

Whitney believes that Wells Fargo is under-reserved by at least $4.5 billion as of Monday and will need to raise capital to restore its balance sheet this year and perhaps by even more in 2009. The analyst has won acclaim in recent months for her accurate calls that Citigroup Inc. (C) and Wachovia Corp. (WB) would have to cut their dividends.

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Whitney bases her estimates on a historical study of Wells Fargo's charge-off rates, which she says during the first quarter exceeded the bank's loan loss reserves for the first time since at least 1990. She assumes that credit conditions will continue to deteriorate, forcing the bank to increase its reserves to offset the growing number of charge-offs.