FBR Capital Markets expects equity investors will seek quality brand names with strong fundamentals in the wake of the huge decline in stocks over the past week. Therefore, analysts at the investment bank upgraded their view on banking giant Wells Fargo (WFC) to outperform with a $31 price target, as the “valuation (is) too attractive to ignore.” “Our rating change presumes that bank investors will flock to quality names that can best weather the adverse effect of a flattening yield curve,” said Paul Miller, analyst at FBR Capital Markets. “The company’s strong deposit franchise, diverse business lines, and solid mortgage origination platform position it well to sustain a healthy (net interest margin).” Analysts said Wells Fargo has significant long-term value because of the bank’s “low-cost, core-heavy deposit base and branch network” that provides cheap and stable funding. FBR said 77% of Wells Fargo’s funding base is generated by core deposits and analysts expect stronger mortgage banking operations in the third quarter than the first half of 2011. Wells Fargo plans to cut $1.5 billion of quarterly non-interest expenses over the next six quarters, which bodes well for FBR’s share price target. “The company’s largely domestic footprint coupled with its best-in-class deposit franchise, shelters it from wider market turmoil, making it an attractive holding relative to peers in a volatile market,” according to FBR. Among the big losers during Monday’s widespread sell off was Bank of America (BAC). The banking giant’s stock fell more than 20% and is now down nearly 50% this year. Write to Jason Philyaw. Follow him on Twitter: @jrphilyaw.

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