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-{{hide_logo|path=[[Image:wells fargo logo.jpg|160px|left]]}}+'''Wells Fargo & Company ([[NYSE]]:WFC),''' is the fourth largest bank holding company in the United States.<ref name=WFC10K2009Pg1>[http://www.wikinvest.com/stock/Wells_Fargo_%28WFC%29/Filing/10-K/2010/F46738764 WFC 10-K 2009 Item 1 Pg. 1]</ref> Wells Fargo & Company is best classified as a diversified [[financial services]] company, and with over 80 distinct businesses, Wells Fargo offers a full range of financial products and services and targets all types of clients, from individuals to large corporations in all 50 states as well as the District of Columbia. In 2010, Wells Fargo earned a total of $85 billion in total revenues and a net income of $12.4 billion.<ref name=WFC2010 />
-'''Wells Fargo & Company ([[NYSE]]:WFC),''' with [[stock:Wells_Fargo_(WFC)/Data/Total_Assets|$1.2 trillion in total assets]] as of December 31, 2009, is the fourth largest bank holding company in the United States.<ref name=WFC10K2009Pg1>[http://www.wikinvest.com/stock/Wells_Fargo_%28WFC%29/Filing/10-K/2010/F46738764 WFC 10-K 2009 Item 1 Pg. 1]</ref> Wells Fargo & Company is best classified as a diversified [[financial services]] company, and with over 80 distinct businesses, Wells Fargo offers a full range of financial products and services and targets all types of clients, from individuals to large corporations in all 50 states as well as the District of Columbia. During 2009, Wells Fargo posted a [[stock:Wells_Fargo_(WFC)/Data/Derived_Net Income|$12.3 billion net income]] on total revenues of [[stock:Wells_Fargo_(WFC)/Data/Total_Revenues|$99 billion]].+Wells Fargo became the nation's largest [[mortgage]] lender and the second-largest diversified [[financial services]] firm in the United States in term of deposits [[Stock:WFC]] after acquiring [[Wachovia (WB)]].<ref name=trad >[http://www.tradingmarkets.com/.site/news/Stock%20News/2104666/ Trading Markets "Wells Fargo and Wachovia Merger Completed" 1 January 2009]</ref><ref>[http://www.forbes.com/feeds/afx/2009/04/27/afx6343636.html Forbes "Bank of America drops Countrywide name" 27 April 2009]</ref> There was a legal dispute with the deal however, as Citigroup had sought to acquire Wachovia as well. Wells Fargo and Citigroup reached a settlement, with Wells Fargo paying Citigroup $100 million to settle the lawsuits.<ref name=WFCWBC>[http://www.reuters.com/article/idUSTRE6AI47120101120 Wells Fargo to pay Citi $100 million over Wachovia. Maria Aspan and Jonathan Stempel. Reuters.]</ref> Wells Fargo's sold $12.6 billion in [[common stock]] and $25 billion in [[preferred stock]] to the US Government through former U.S. Treasury Secretary Paulson's $700B [[Troubled Assets Relief Program (TARP)]] as part of the deal to raise enough cash for the acquisition.<ref>[http://online.wsj.com/article/SB122303190029501925.html?mod=testMod Wachovia Chooses Wells Fargo, Spurns Citi - WSJ.com]</ref><ref>[http://www.federalreserve.gov/newsevents/press/orders/20081012a.htm Board of Governors of the Federal Reserve System "Press Release" 12 Oct 2008]</ref><ref>[http://www.reuters.com/article/americasMergersNews/idUSN0533867220081105 Forbes: Business Finance "UPDATE 3-Wells Fargo to raise $10 bln to fund Wachovia deal" 5 Nov 2008]</ref>
- +
-On December 15, 2009, Wells Fargo raised $12.25 billion in a stock sale to help repay the $25 billion in [[Troubled Assets Relief Program (TARP)]] money that it received from the government during the [[2008 Financial Crisis]].<ref name=WFCREPAYTARP>[http://www.reuters.com/article/idUSTRE5BE2TV20091215?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FbusinessNews+%28News+%2F+US+%2F+Business+News%29 Wells Fargo sells $12.25 billion in stock to exit TARP. Elinor Comlay. Reuters.]</ref> Although this [[dilution|diluted]] Wells Fargo's shares by approximately ten percent, it allows the bank to avoid paying an annual [[dividends|dividend]] to the government of $1.25 billion and frees it of government oversight, making it more flexible.+
- +
-For the fourth quarter of 2009, Wells Fargo posted a net income of $2.82 billion, a sharp turnaround from their year ago loss of $2.73 billion.<ref name=WFC2009Q4MW>[http://www.marketwatch.com/story/wells-fargo-swings-to-3-billion-quarterly-profit-2010-01-20 Wells Fargo turns profit in fourth quarter. Alistair Barr. MarketWatch.]</ref> Wells Fargo had a record $22.7 billion in revenues for the fourth quarter as it finished strong in a year in which Wells Fargo generated record net income of $12.3 billion on record revenue of $88.7 billion. Despite these record earnings, there is concern among some analysts about Wells Fargo's credit charge offs, which totaled $5.4 billion in the fourth quarter of 2009.<ref name=WFC2009Q4MW /> +
==Company Overview== ==Company Overview==
-Wells Fargo became the nation's largest [[mortgage]] lender and the second-largest diversified [[financial services]] firm in the United States in term of [[deposits]] after acquiring [[Wachovia (WB)]] on December 31, 2008.<ref name=trad >[http://www.tradingmarkets.com/.site/news/Stock%20News/2104666/ Trading Markets "Wells Fargo and Wachovia Merger Completed" 1 January 2009]</ref><ref>[http://www.forbes.com/feeds/afx/2009/04/27/afx6343636.html Forbes "Bank of America drops Countrywide name" 27 April 2009]</ref> Wells Fargo's sold $12.6 billion in [[common stock]] and $25 billion in [[preferred stock]] to the US Government through former U.S. Treasury Secretary Paulson's $700B [[Troubled Assets Relief Program (TARP)]] as part of the deal to raise enough cash for the acquisition.<ref>[http://online.wsj.com/article/SB122303190029501925.html?mod=testMod Wachovia Chooses Wells Fargo, Spurns Citi - WSJ.com]</ref><ref>[http://www.federalreserve.gov/newsevents/press/orders/20081012a.htm Board of Governors of the Federal Reserve System "Press Release" 12 Oct 2008]</ref><ref>[http://www.reuters.com/article/americasMergersNews/idUSN0533867220081105 Forbes: Business Finance "UPDATE 3-Wells Fargo to raise $10 bln to fund Wachovia deal" 5 Nov 2008]</ref>+Like virtually all major banks, Wells Fargo has been negatively impacted by the [[2007 Credit Crunch|credit crunch]] and the subsequent [[U.S. Economic Cycles|economic decline]]. However, unlike many other banks, Wells Fargo has not been forced to [[write down]] large losses on its assets. Despite this, the Standard & Poor's Rating Service downgraded Wells Fargo from its AAA rating to AA+ after its acquisition of Wachovia.<ref name=trad />
-Like virtually all major banks, Wells Fargo has been negatively impacted by the [[2007 Credit Crunch]] and the subsequent [[U.S. Economic Cycles|economic decline]]. However, unlike many other banks, Wells Fargo has not been forced to [[write down]] large losses on its assets.<ref name= fin /> Despite this, the Standard & Poor's Rating Service downgraded Wells Fargo from its AAA rating to AA+ after its acquisition of Wachovia.<ref name=trad /> During the first quarter of 2009, [[Berkshire Hathaway (BRK)]] manager [[Warren Buffett]] raised his stake in Wells Fargo by 12 million shares, signaling Buffett believes the company's performance will continue to do well.<ref name=BuffetLiftsShares>[http://www.marketwatch.com/story/buffett-lifted-berkshire-stake-in-wells-fargo?siteid=rss Buffett lifted Berkshire stake in Wells Fargo. Alistair Barr. MarketWatch.]</ref> During the third quarter of 2009, Buffett further increased his stake in Wells Fargo by more than 10 million shares in another show of support for Wells Fargo.<ref name=BuffettIncShares>[http://www.marketwatch.com/story/berkshire-raised-wal-mart-wells-fargo-stakes-2009-11-16?siteid=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A%20marketwatch%2Ffinancial%20(MarketWatch.com%20-%20Financial%20Services%20Industry%20News)&utm_content=Google%20Reader Berkshire raised Wal-Mart, Wells stakes in third quarter. Alistair Barr. MarketWatch]</ref>+Wells Fargo raised $12.25 billion in a stock sale to help repay the $25 billion in [[Troubled Assets Relief Program (TARP)]] money that it received from the government during the [[2008 Financial Crisis|Financial Crisis]].<ref name=WFCREPAYTARP>[http://www.reuters.com/article/idUSTRE5BE2TV20091215 Wells Fargo sells $12.25 billion in stock to exit TARP. Elinor Comlay. Reuters.]</ref> Although this [[dilution|diluted]] Wells Fargo's shares by approximately ten percent, it allows the bank to avoid paying an annual [[dividends|dividend]] to the government of $1.25 billion and frees it of government oversight, making it more flexible.
- +
-On September 25, 2009, Newsweek magazine ranked Wells Fargo the "[[Renewable Energy|Greenest]] Bank" in America, having helped environmentally friendly businesses with over $5.0 billion in financing.<ref name=BUSWIRE>[http://www.wikinvest.com/stock/Wells_Fargo_(WFC)/News/399325/Newsweek_Ranks_Wells_Fargo_Greenest_Bank_in_U.S. Newsweek Ranks Wells Fargo Greenest Bank in U.S. Business Wire.]</ref> With growing concern about [[Global Climate Change|global climate change]] and other environmental issues, Wells Fargo's initiative and lead among financial companies may give it an advantage in the future among its potential clients.+
===Business and Financial Metrics=== ===Business and Financial Metrics===
-{| {{table}} border="1" cellpadding="3" style="border-collapse:collapse"+In 2010, Wells Fargo earned a total of $85 billion in total revenues, a decline from its 2009 total revenues of $89 billion.<ref name=WFC2010>[https://www.wellsfargo.com/downloads/pdf/invest_relations/wf2010annnualreport.pdf WFC Annual Report 2010]</ref> Despite the decrease in total revenues, Wells Fargo was able to increase its net income from $12.3 billion in 2009 to $12.4 billion in 2010.<ref name=WFC2010 />
-| align="center" style="background:#f0f0f0;"|'''Wells Fargo Financials (In Millions)'''+
-| align="center" style="background:#f0f0f0;"|'''2007'''<ref name=WFC10K2008Pg48>[[stock:Wells_Fargo_%28WFC%29/Filing/10-K/2009/F1936537| WFC 10-K 2008 Item 6 Pg. 48]]</ref>+
-| align="center" style="background:#f0f0f0;"|'''2008'''<ref name=WFCAR2009Pg90>[https://www.wellsfargo.com/downloads/pdf/invest_relations/wf2009annualreport.pdf WFC Annual Report 2009 Pg. 90]</ref>+
-| align="center" style="background:#f0f0f0;"|'''2009'''<ref name=WFCAR2009Pg90 />+
-|-+
-| [[Net Interest Income]]||16,035||9,164||24,656+
-|-+
-| Total Non Interest Income||18,546||16,734||43,362+
-|-+
-| Total Non Interest Expense||22,746||22,598||49,020+
-|-+
-| [[Net Income]]||8,057||2,655||12,275+
-|-+
-|}+
- +
-===Business Segments===+
-Wells Fargo separates its businesses into three main segments for revenue reporting purposes: i) Community Banking, ii) Wholesale Banking, and iii) Wealth, Brokerage, and Retirement. Prior to 2009, the Brokerage and Retirement segment was named Wells Fargo Financial.+
- +
-====Community Banking ($8.6 billion in [[Net Income]], 63.7% of 2009 [[stock:Wells_Fargo_(WFC)/Data/Derived_Net_Income| Total Net Income]])====+
-Wells Fargo's Community Banking business serves small business clients (with up to $20 million in annual sales) as well as retail customers and high-net-worth individuals, providing them with a wide range of services such as investment, insurance and trust services, among others. It offers its products through a variety of channels, including the company's regional banking branches, over 6,700 ATMs, website, and telephone banking service. In 2009, Wells Fargo began reporting Wells Fargo Financial under Community Banking.+
- +
-Wells Fargo's substantial credit card business now lies under Community Banking, and it has issued over 7.7 million [[credit cards]] and over 20 million debit cards, making it the second largest debit card issuer in the U.S.<ref>[https://www.wellsfargo.com/about/today2 Wells Fargo Today]</ref> As a credit card issuer, it charges interchange fees (fees charged to merchants who accept credit cards), interest on outstanding customer balances, and a variety of other fees charged to customers, such as late or missing payment fees, exceeding the card's credit limit, and monthly or annual membership fees. Wells Fargo also has costs related to credit cards, such as interest expense (Wells Fargo generally borrows the money that it lends to credit card customers), fraud, and rewards (in order to compete with each other, banks offer cash-back rewards and bonus point systems to lure customers; these generate costs that the credit card issuer must bear).+
- +
-Wells Fargo's Community Banking segment earned $8.6 billion in net income from its $59 billion in revenues during 2009.<ref name=WFCAR2009Pg45>[https://www.wellsfargo.com/downloads/pdf/invest_relations/wf2009annualreport.pdf WFC Annual Report 2009 Pg. 45]</ref> This represented a substantial increase from its 2008 earnings of $2.1 billion on revenues of $33 billion in 2008.<ref name=WFCAR2009Pg45 /> Wells Fargo attributed the strong growth to a large increase in mortgage originations, as they increased from $230 billion in 2008 to $420 billion in 2009.<ref name=WFCAR2009Pg45 />+
- +
-====Wholesale Banking ($3.9 billion, 28.9%)====+
-Wells Fargo's Wholesale Banking Group serves the company's business clients with annual sales exceeding $10 million. Wholesale Banking is responsible for a line of corporate, commercial, and [[real estate]] banking products and services, including institutional investments, employee benefit trusts, [[investment banking]], construction loans, and [[insurance]]. After the Wachovia Bank acquisition, Wells Fargo was able to expand its product services to include [[investment banking]], equity trading, fixed-income sales and trading, and equity and fixed-income research, among others.+
- +
-Net income for Wholesale Banking grew from $1.4 billion in 2008 to $3.9 billion in 2009, as its revenues also increased from $8.2 billion to $20.3 billion.ref name=WFCAR2009Pg45 /> Wells Fargo attributed this increase to broad based growth across its many businesses as well as stabilizing capital markets. Also, with over 750 offices world wide, its Wholesale Banking segment saw significant growth in the number of middle market companies that got loans.+
- +
-====Wealth, Brokerage, and Retirement ($1 billion, 7.4%)====+
-Wells Fargo's Wealth, Brokerage, and Retirement segment provides a full range of financial services to high net worth and affluent individuals. The products offered by this segment include financial planning, private banking, credit, investment management, trust and estate services, and business succession planning, among others.<ref name=WFCAR2009Pg46>[https://www.wellsfargo.com/downloads/pdf/invest_relations/wf2009annualreport.pdf WFC Annual Report 2009 Pg. 46]</ref>+
- +
-During 2009, this segment had a net income of $1 billion from its revenues of $11.5 billion.<ref name=WFCAR2009Pg45 /> Wells Fargo believes earnings were hurt by the extremely low yield on U.S. Treasury Bills and the low interest rate environment in general.+
==Trends and Forces== ==Trends and Forces==
 +===Wells Fargo has teamed up with [[Visa (V)]] to pilot test mobile payments system===
 +Wells Fargo announced that it has teamed up with Visa to pilot test a mobile payments system using smartphones such as the iPhone and Blackberry. The pilot will be conducted by 200 employees of Wells Fargo in San Francisco, where both Visa and Wells Fargo are headquartered.<ref name=WFCVPILOT>[http://online.wsj.com/article/SB10001424052748704250704576005841142744666.html Wells Fargo, Visa Test Mobile Payments. Aparajita Saha-Bubna. The Wall Street Journal.]</ref> This announcement came shortly after three of the largest telecom carriers ([[AT&T (T)]], [[Verizon Communications (VZ)]], and [[Deutsche Telekom AG (DT)|T-Mobile]] announced a joint venture for mobile payments. The upcoming struggle for mobile payments dominance between credit card companies and telecom companies may have huge implications for future earnings as this market begins to develop.
===Effects of [[U.S. Housing Market| housing market slowdown]]=== ===Effects of [[U.S. Housing Market| housing market slowdown]]===
-The U.S. [[housing market]] had a slowdown that began in 2007, and as it continued into 2008 and 2009, Wells Fargo's mortgage lending business was hit by slow growth and falling [[residential real estate prices]]. The economy as a whole experienced the "home equity effect", where homeowners perceive their house values to be lower than they anticipated, and therefore perceive themselves to be relatively less wealthy. As a result, consumers spend and consume less. The number of total housing starts has fallen 63% since peak levels during the end of the housing boom.<ref>[http://www.nahb.org/generic.aspx?genericContentID=53936&sectionid=872&channelid=311&channelID=311 Housing Economics "Housing Starts State & Metro Forecasts for 2008-2009"]</ref> During the last quarter of 2008, the nation's banks recorded a total of $26.2 billion in losses and faced a weighted average of 94% fall in profits.<ref>[http://www.startribune.com/templates/Print_This_Story?sid=40360662 Star Tribune "FDIC says US banks posted $26.2 billion loss at end of 2008, first quarterly loss since 1990" 26 Feb 2009]</ref> Wells Fargo Home Mortgages have taken a setback, with higher provisions for credit losses offsetting revenue growth in 2008. However, Wells Fargo has been dealing with the mortgage setbacks relatively well due to its wide [[diversification]] in product offerings, which allows the company to compensate for poor performance in the home mortgage business.+Wells Fargo's mortgage lending business was hit by slow growth and falling [[residential real estate prices]]. The economy as a whole experienced the "home equity effect", where homeowners perceive their house values to be lower than they anticipated, and therefore perceive themselves to be relatively less wealthy. As a result, consumers spend and consume less. The number of total housing starts has fallen 63% since peak levels during the end of the housing boom.<ref>[http://www.nahb.org/generic.aspx?genericContentID=53936&sectionid=872&channelid=311&channelID=311 Housing Economics "Housing Starts State & Metro Forecasts for 2008-2009"]</ref> Wells Fargo Home Mortgages have taken a setback, with higher provisions for credit losses offsetting revenue growth. However, Wells Fargo has been dealing with the mortgage setbacks relatively well due to its wide [[diversification]] in product offerings, which allows the company to compensate for poor performance in the home mortgage business.
-====[[Subprime lending| Subprime]] bust avoidance====+===[[Subprime lending| Subprime]] bust avoidance===
The housing slowdown is often attributed to the collapse of the [[subprime lending]] market. [[Subprime lending]], or lending money to customers with poor credit scores (riskier borrowers), can lead to higher loan losses in harsh economic climates or during periods of stagnant or falling housing prices. As customers find themselves unable to make their debt payments, which are higher than average to begin with, [[default|defaults]] rise. The housing slowdown is often attributed to the collapse of the [[subprime lending]] market. [[Subprime lending]], or lending money to customers with poor credit scores (riskier borrowers), can lead to higher loan losses in harsh economic climates or during periods of stagnant or falling housing prices. As customers find themselves unable to make their debt payments, which are higher than average to begin with, [[default|defaults]] rise.
-Wells Fargo has fared better than most competitors in the mortgage business, mainly because its mortgages are predominately [[prime lending rate|prime]] and near-prime. As a result, Wells Fargo has not experienced high rates of default seen in the subprime market. Wells Fargo has avoided much of these losses by deciding not to extend or purchase option adjustable rate mortgages (option ARMs). However, Wachovia Bank, which was acquired by Wells Fargo, took part in Option ARMs and subprime lending. Wachovia has $122 billion in outstanding subprime loans and a loan loss of 29% or $36 billion is expected.<ref>[http://mortgagestats.blogspot.com/2008/12/wells-fargo-wachovia-option-arms.html Mortgage Statistics "Wells Fargo/Wachovia Option Arms" 28 Dec 2009]</ref> Despite this prediction, the changing economic situation has made existing models unreliable and it is unclear what Wachovia's assets actual default rate will be.+Wells Fargo has fared better than most competitors in the mortgage business, mainly because its mortgages are predominately [[prime lending rate|prime]] and near-prime. As a result, Wells Fargo has not experienced high rates of default seen in the subprime market. Wells Fargo has avoided much of these losses by deciding not to extend or purchase option adjustable rate mortgages (option ARMs). However, Wachovia Bank, which was acquired by Wells Fargo, took part in Option ARMs and subprime lending.
- +
-===Exposure to [[U.S. Economic Cycles]]===+
- +
-Its heavy concentration in the U.S. makes Wells Fargo more dependent on U.S. economic conditions than some of its more internationally diverse peers. [[U.S. Economic Cycles| Global gross domestic product]] increased by an estimated 4.9% over the course of 2007, though the U.S. GDP growth rate was notably lower.<ref>[http://www.imf.org/external/pubs/ft/weo/2008/01/c1/FIG1_01.csv IMF World Economic Outlook (WEO) - Housing and the Business Cycle, April 2008]</ref> As the world economy continues to expand, consumers and firms have more wealth to spend and invest, which translates into increased revenue for Wells Fargo. At the same time, widespread economic weakness that extends beyond the United States can severely impact Wells Fargo's earnings. For instance, the international economic downturn that occurred after the [[2007 credit crunch]] and the [[2008 Financial Crisis]] considerably lowered Wells Fargo's earnings.+
-[[image:Interest_Rate_Trends.png‎|350px|thumb|right|U.S. interest rates over time]]+
- +
- +
-===[[Interest Rates]] Sensitivity===+
- +
-The [[Federal Reserve]] increased the [[federal funds rate]] from 4.25% to 5.25% early in 2006, which put upward pressure on [[interest rates]]. This had the effect of slowing economic growth and lowering inflation, which partially offset the effects of strong economic expansion (discussed above). Higher interest rates tend to discourage consumer spending and investment, which impacts Wells Fargo in the form of lower balances charged to credit cards, fewer loans and deposits, and reduced business loans. At the same time, higher general interest rates allow WFC to charge its customers higher interest on their loans, which could increase the company's revenue from the loans that customers do take out.+
- +
-In late 2007 and early 2008, the Fed implemented a series of interest rate cuts, reducing the rate from 5.25% in September of 2007 to 0-.25% in December 2008.<ref>[http://www.federalreserve.gov/fomc/fundsrate.htm Federal Reserve Board "Open Market Operations" 16 Dec 2008]</ref> These measures were largely aimed at stimulating economic activity in the face of a [[U.S. Economic Cycles|recession]] caused by fallout in the [[subprime lending]] industry and the [[2008 Financial Crisis]]. Wells Fargo will benefit from these cuts if they have the desired effect of stimulating consumer spending and encouraging businesses to expand.+
===Potential implementation of "Financial Crisis Responsibility Fee"=== ===Potential implementation of "Financial Crisis Responsibility Fee"===
-Obama announced in January of 2010 a plan to tax the largest banks and financial institutions to recover [[TARP]] funds that the government used to bailout many of the banks. The proposed plan calls for a 0.15% tax on each firm's [[liability|liabilities]], excluding Tier 1 capital and those already insured by the FDIC, with the goal of raising $90 billion over ten years.<ref name=MWBankFee>[http://www.marketwatch.com/story/obama-proposes-special-fee-on-financial-companies-2010-01-14?pagenumber=2 Obama proposes special fee on financial companies. Rex Nutting & Robert Schroeder. MarketWatch.]</ref> However, the financial institutions subject to this fee are limited to only those with over $50 billion in assets. If this plan gets passed into law, it could represent a substantial cost to Wells Fargo for up to ten years.+Obama announced a plan to tax the largest banks and financial institutions to recover [[TARP]] funds that the government used to bailout many of the banks. The proposed plan calls for a 0.15% tax on each firm's [[liability|liabilities]], excluding Tier 1 capital and those already insured by the FDIC, with the goal of raising $90 billion over ten years.<ref name=MWBankFee>[http://www.marketwatch.com/story/obama-proposes-special-fee-on-financial-companies-2010-01-14?pagenumber=2 Obama proposes special fee on financial companies. Rex Nutting & Robert Schroeder. MarketWatch.]</ref> However, the financial institutions subject to this fee are limited to only those with over $50 billion in assets. If this plan gets passed into law, it could represent a substantial cost to Wells Fargo for up to ten years.
-==Competitors==+==Competition==
 +With 6,795 branches and $760 billion in total domestic deposits, Wells Fargo has the most offices and the second most deposits in the United States.<ref name=FDICDEP2009 /> Since Wells Fargo focuses its business operations on the domestic U.S. market, its major nationwide competitors include [[Bank of America (BAC)]], [[JP Morgan Chase (JPM)]], and [[Citigroup (C)]]. Wells Fargo's lack of international exposure contrasts with these top competitors. Although Wells Fargo holds assets overseas, its remains strongly focused on the United States domestic market. While this does allow Wells Fargo to focus its resources on gaining greater market share within the U.S., Wells Fargo is thereby more vulnerable to the [[U.S. economic cycles]], as it does not have foreign markets to buffer domestic performance.
-Wells Fargo competes against a many local and regional banks as well as large international banks. Since Wells Fargo focuses its business operations on the domestic U.S. market, its main nationwide competitors are [[Bank of America (BAC)]] and [[U.S. Bancorp (USB)]]. Wells Fargo's lack of international exposure contrasts with top competitor Bank of America. Although WFC holds assets overseas, its interest in foreign markets does not extend to opening branch offices outside the United States. While this does allow Wells Fargo to focus its resources on gaining greater market share in the U.S., it does make WFC more vulnerable to the [[U.S. economic cycles]], with no foreign markets to buffer domestic performance.+*'''[[Bank of America (BAC)]]''' is the world's leading bank and financial holding company with over $907 billion in deposits and 6,238 offices within the United States.<ref name=FDICDEP2009>[http://www2.fdic.gov/sod/sodSumReport.asp?sInfoAsOf=2009&sAreas=&barItem=3 FDIC Summary of Deposits: June 30, 2009]</ref>
 +*'''[[JP Morgan Chase (JPM)]]''' is one of the world's largest financial services companies, offering both [[investment banks|investment banking]] as well as commercial banking. It has the third most deposits in the United States with $640 billion.<ref name=FDICDEP2009 />
 +*'''[[Citigroup (C)]]''', another of the commercial banking giants, ranks fourth in the United States in terms of deposits with $321 billion.<ref name=FDICDEP2009 />
-*[[Bank of America (BAC)]], with 11.33% of total domestic deposits, is the market leader for domestic banking.<ref name=USDeposits /> It also has higher revenues and net income compared to Wells Fargo, as in 2008 Bank of America had a net income of $4.00 billion and $72.7 billion in revenues.<ref name=BAC10K2008Pg102 />+<wikichart width="400" height="300" flashvars="ticker=NYSE:WFC,NYSE:BAC, NYSE:JPM, NYSE:C&tickerAlias=Wells Fargo vs Top Competitors"/>
-*[[U.S. Bancorp (USB)]], the sixth largest bank in the United States, primarily serves the banking needs in the Midwest region of the United States. In 2008, it had total revenues of $19.2 billion in 2008 and $2.83 billion in net income.<ref name=USBAR2008Pg3>[http://media.corporate-ir.net/media_files/irol/11/117565/USBancorp_2008_AnnualReport.pdf USB Annual Report 2008 Pg. 3]</ref>+
- +
-{| class="wikitable" +
- +
-|- bgcolor="#ececec" +
-| Width="170" rowspan="2"| '''Income Data, in millions USD''' || colspan="3" align="center" | '''Wells Fargo''' <ref name=fin >[[stock:Wells_Fargo_%28WFC%29/Filing/10-K/2009/F1936537| WFC 10-K 2008 Consolidate Financial Data p.37]]</ref>|| colspan="3" align = "center" | '''[[Bank of America (BAC)]]''' <ref name=BAC10K2008Pg102>[[stock:Bank_of_America_%28BAC%29/Filing/10-K/2009/F6209069| BAC 10-K 2008 Consolidated Financial Statements p.102]]</ref>|| colspan="3" align = "center" | '''[[U.S. Bancorp (USB)]]''' <ref>[[stock:U.S._Bancorp_(USB)/Capital%20Covenants| USB 10-K 2008 Consolidate Financial Statements p.2]]</ref>+
- +
-|- bgcolor="#ececec"+
-| width="75" align="center" | 2006|| width="75" align = "center" | 2007|| width="75" align = "center" | 2008|| width="75" align = "center" | 2006|| width="75" align = "center" | 2007|| width="75" align = "center" | 2008|| width="75" align="center" | 2006|| width="75" align = "center" | 2007|| width="75" align = "center" | 3Q 2008+
-|-+
-| colspan="1"| ''Net interest income'' ||align="center" | $19,951 || align = "center" | $20,974 ||align="center" |$25,143 || align = "center" | $34,591 || align = "center" | $34,433 ||align = "center" | $45,360 || align = "center"| $6,741 || align = "center"| $6,689 || align = "center"| $5,705+
-|-+
-| colspan="1"| ''Non-interest revenue'' || align="center" | $15,740 || align = "center" | $18,416 || align="center" | $16,754 || align = "center" | $37,989 || align = "center" | $31,886 || align = "center" | $27,422 ||align = "center"| $6,846 || align = "center"| $7,172 || align = "center"| $6,073+
-|-+
-| colspan="1"| ''Total revenue'' || align="center" | $35,691 || align = "center" | $39,390 || align="center" | $41,897 || align = "center" | $72,580 || align = "center" | $66,319 || align = "center" | $72,782 ||align = "center"| $13,587 || align = "center"| $13,861 || align = "center"| $11,053+
-|-+
-| colspan="1"| ''Net income (profit)'' || align="center" | $8,482 || align = "center" | $8,057 || align="center" | $2,655|| align = "center" | $21,133 || align = "center" | $14,982 || align = "center" | $4,008 ||align = "center"| $4,751 || align = "center"| $4,324 || align = "center"| $2,616+
-|-+
-| colspan="1"| ''Profit margin'' || align="center" | 23.77% || align = "center" | 20.45% || align="center" | 6.33% || align = "center" | 18.13% || align = "center" | 22.59% || align = "center" | 5.51% || align = "center"| 34.96% || align = "center"| 31.61% || align = "center"| 23.66%+
-|-+
-|}+
- +
-Wells Fargo was originally ranked fourth in market share of total domestic deposits, behind [[Bank of America (BAC)]], [[J P Morgan Chase (JPM)]], and [[Wachovia (WB)]]. However, after the acquisition of Wachovia, the bank became the second largest bank in terms of total domestic deposits and surpassed JPMorgan.+
-[[Image:ldcr.jpg|thumb|450px|right|WFC has a low loans to deposit ratio, though not the lowest in the industry]]+
-[[Image:nimc.jpg|thumb|450px|right|Wells Fargo has the highest net interest margin (NIM)]]+
- +
-{| class="wikitable" +
- +
-|- bgcolor="#ececec" +
-| Width="200"| || colspan="5" align = "center" | '''Domestic Deposit Market Share (%)''' +
-|- bgcolor="#ececec" +
-!Width="60" |+
-!Width="80"|'''2004'''+
-!Width="80"|'''2005'''+
-!Width="80"|'''2006''' +
-!Width="80"|'''2007'''+
-!Width="60"|'''2008'''<ref name=USDeposits>[http://www.fdic.gov/bank/analytical/quarterly/2008_vol2_4/highlights.html FDIC Quarterly 2008, Volume 2, No. 4 "Highlights from the 2008 Summary of Deposits Data"]</ref>+
-|-+
-| colspan="1"| '''[[Bank of America (BAC)]]''' || align = "center" | 10.07 || align = "center" | 10.36 || align="center" | 9.54 || align = "center" | 10.00 || align = "center" | 11.33+
-|-+
-| colspan="1"| '''Wells Fargo (WFC)''' || align = "center" | 4.90 || align = "center" | 4.64 || align="center" | 5.20 || align = "center" | 4.20 || align = "center" | 10.33+
-|-+
-| colspan="1"| '''[[J P Morgan Chase (JPM)]]''' || align = "center" | 4.18 || align = "center" | 7.07 || align="center" | 7.47 || align = "center" | 7.40 || align = "center" | 9.85+
-|-+
-|}<ref>[http://www2.fdic.gov/sod/sodSumReport.asp?barItem=3&sInfoAsOf=2008 FDIC "Summary of Deposits" June 2008]</ref>+
- +
-<wikichart width="400" height="400" flashvars="ticker=NYSE:WFC,NYSE:BAC, NYSE:USB&tickerAlias=Wells Fargo vs Top Competitors"/>+
{{clr}} {{clr}}
- 
- 
==References== ==References==

Revision as of 15:34, February 10, 2012

Wells Fargo & Company (NYSE:WFC), is the fourth largest bank holding company in the United States.[1] Wells Fargo & Company is best classified as a diversified financial services company, and with over 80 distinct businesses, Wells Fargo offers a full range of financial products and services and targets all types of clients, from individuals to large corporations in all 50 states as well as the District of Columbia. In 2010, Wells Fargo earned a total of $85 billion in total revenues and a net income of $12.4 billion.[2]

Wells Fargo became the nation's largest mortgage lender and the second-largest diversified financial services firm in the United States in term of deposits Stock:WFC after acquiring Wachovia (WB).[3][4] There was a legal dispute with the deal however, as Citigroup had sought to acquire Wachovia as well. Wells Fargo and Citigroup reached a settlement, with Wells Fargo paying Citigroup $100 million to settle the lawsuits.[5] Wells Fargo's sold $12.6 billion in common stock and $25 billion in preferred stock to the US Government through former U.S. Treasury Secretary Paulson's $700B Troubled Assets Relief Program (TARP) as part of the deal to raise enough cash for the acquisition.[6][7][8]

Company Overview

Like virtually all major banks, Wells Fargo has been negatively impacted by the credit crunch and the subsequent economic decline. However, unlike many other banks, Wells Fargo has not been forced to write down large losses on its assets. Despite this, the Standard & Poor's Rating Service downgraded Wells Fargo from its AAA rating to AA+ after its acquisition of Wachovia.[3]

Wells Fargo raised $12.25 billion in a stock sale to help repay the $25 billion in Troubled Assets Relief Program (TARP) money that it received from the government during the Financial Crisis.[9] Although this diluted Wells Fargo's shares by approximately ten percent, it allows the bank to avoid paying an annual dividend to the government of $1.25 billion and frees it of government oversight, making it more flexible.

Business and Financial Metrics

In 2010, Wells Fargo earned a total of $85 billion in total revenues, a decline from its 2009 total revenues of $89 billion.[2] Despite the decrease in total revenues, Wells Fargo was able to increase its net income from $12.3 billion in 2009 to $12.4 billion in 2010.[2]

Trends and Forces

Wells Fargo has teamed up with Visa (V) to pilot test mobile payments system

Wells Fargo announced that it has teamed up with Visa to pilot test a mobile payments system using smartphones such as the iPhone and Blackberry. The pilot will be conducted by 200 employees of Wells Fargo in San Francisco, where both Visa and Wells Fargo are headquartered.[10] This announcement came shortly after three of the largest telecom carriers (AT&T (T), Verizon Communications (VZ), and T-Mobile announced a joint venture for mobile payments. The upcoming struggle for mobile payments dominance between credit card companies and telecom companies may have huge implications for future earnings as this market begins to develop.

Effects of housing market slowdown

Wells Fargo's mortgage lending business was hit by slow growth and falling residential real estate prices. The economy as a whole experienced the "home equity effect", where homeowners perceive their house values to be lower than they anticipated, and therefore perceive themselves to be relatively less wealthy. As a result, consumers spend and consume less. The number of total housing starts has fallen 63% since peak levels during the end of the housing boom.[11] Wells Fargo Home Mortgages have taken a setback, with higher provisions for credit losses offsetting revenue growth. However, Wells Fargo has been dealing with the mortgage setbacks relatively well due to its wide diversification in product offerings, which allows the company to compensate for poor performance in the home mortgage business.

Subprime bust avoidance

The housing slowdown is often attributed to the collapse of the subprime lending market. Subprime lending, or lending money to customers with poor credit scores (riskier borrowers), can lead to higher loan losses in harsh economic climates or during periods of stagnant or falling housing prices. As customers find themselves unable to make their debt payments, which are higher than average to begin with, defaults rise.

Wells Fargo has fared better than most competitors in the mortgage business, mainly because its mortgages are predominately prime and near-prime. As a result, Wells Fargo has not experienced high rates of default seen in the subprime market. Wells Fargo has avoided much of these losses by deciding not to extend or purchase option adjustable rate mortgages (option ARMs). However, Wachovia Bank, which was acquired by Wells Fargo, took part in Option ARMs and subprime lending.

Potential implementation of "Financial Crisis Responsibility Fee"

Obama announced a plan to tax the largest banks and financial institutions to recover TARP funds that the government used to bailout many of the banks. The proposed plan calls for a 0.15% tax on each firm's liabilities, excluding Tier 1 capital and those already insured by the FDIC, with the goal of raising $90 billion over ten years.[12] However, the financial institutions subject to this fee are limited to only those with over $50 billion in assets. If this plan gets passed into law, it could represent a substantial cost to Wells Fargo for up to ten years.

Competition

With 6,795 branches and $760 billion in total domestic deposits, Wells Fargo has the most offices and the second most deposits in the United States.[13] Since Wells Fargo focuses its business operations on the domestic U.S. market, its major nationwide competitors include Bank of America (BAC), JP Morgan Chase (JPM), and Citigroup (C). Wells Fargo's lack of international exposure contrasts with these top competitors. Although Wells Fargo holds assets overseas, its remains strongly focused on the United States domestic market. While this does allow Wells Fargo to focus its resources on gaining greater market share within the U.S., Wells Fargo is thereby more vulnerable to the U.S. economic cycles, as it does not have foreign markets to buffer domestic performance.

  • Bank of America (BAC) is the world's leading bank and financial holding company with over $907 billion in deposits and 6,238 offices within the United States.[13]
  • JP Morgan Chase (JPM) is one of the world's largest financial services companies, offering both investment banking as well as commercial banking. It has the third most deposits in the United States with $640 billion.[13]
  • Citigroup (C), another of the commercial banking giants, ranks fourth in the United States in terms of deposits with $321 billion.[13]



References

  1. WFC 10-K 2009 Item 1 Pg. 1
  2. 2.0 2.1 2.2 WFC Annual Report 2010
  3. 3.0 3.1 Trading Markets "Wells Fargo and Wachovia Merger Completed" 1 January 2009
  4. Forbes "Bank of America drops Countrywide name" 27 April 2009
  5. Wells Fargo to pay Citi $100 million over Wachovia. Maria Aspan and Jonathan Stempel. Reuters.
  6. Wachovia Chooses Wells Fargo, Spurns Citi - WSJ.com
  7. Board of Governors of the Federal Reserve System "Press Release" 12 Oct 2008
  8. Forbes: Business Finance "UPDATE 3-Wells Fargo to raise $10 bln to fund Wachovia deal" 5 Nov 2008
  9. Wells Fargo sells $12.25 billion in stock to exit TARP. Elinor Comlay. Reuters.
  10. Wells Fargo, Visa Test Mobile Payments. Aparajita Saha-Bubna. The Wall Street Journal.
  11. Housing Economics "Housing Starts State & Metro Forecasts for 2008-2009"
  12. Obama proposes special fee on financial companies. Rex Nutting & Robert Schroeder. MarketWatch.
  13. 13.0 13.1 13.2 13.3 FDIC Summary of Deposits: June 30, 2009
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