Wells Fargo may post strong Q2 results - KBW

July 2 (Reuters) - Wells Fargo & Co (WFC.N: Quote, Profile, Research) may post strong second-quarter results driven bycontinued high mortgage revenue, said analysts at Keefe, Bruyette & Woods, who raised their quarterly and full-year earnings estimates for the fourth-largest U.S. bank.

The brokerage said its current estimate for mortgage banking revenue in the second quarter is $2.4 billion.

In April, Wells Fargo posted a record first-quarter profit of $3.05 billion as a surge in mortgage refinancings helped it displace Bank of America Corp (BAC.N: Quote, Profile, Research) as the nation's largest home lender. [nN22525562]

KBW, however, maintained an "underperform" rating on the stock, and said it remained cautious due to thin capital levels and significant on- and off-balance sheet risks.

The brokerage said its stress test result for Wells Fargo suggested a $34 billion common capitalneed, including the conversion of $25 billion the bank received under the Troubled Asset Relief Program to common equity.

KBW said it would becomemore positive on Wells Fargo shares if the company was to raise significant capital in the near term, despite earnings dilution.

It raised its second-quarter earnings estimate for the company to 50 cents per share from 38 cents, and for 2009 to $1.60 per share from $0.81.

Shares of Wells Fargo closed at $24.14 Wednesday on the New York Stock Exchange.