Question

Research and describe WELLS FARGO. Describe their current financial condition and compare the results of that company with the industry. Support your answers with financial ratios and provide explanations.

Answer 1

Wells Fargo is an American Multinational Firm which comes under Financial Sector. It has its headquarter in San Francisco, California, also it has offices throughout The United States. As per market capitalization, it is world's second largest bank. In 2018, it is ranked 26th on Fortune 500 rankings, based on its total revenue and ranked 7th in 2016 on the Forbes Magazine Global 2000 list as largest public companies in the world. In 2009, Wells Fargo ranked 1st among banks and insurance companies, in Newsweek Magazine's inaugural "Green Rankings" of the country's 500 largest companies and provided more than US$6 billion funding for environmentally beneficial business opportunities.

History

Initially, the company operated in museums, known as Wells Fargo History Museum. In 1852, the founders of American Express Henry Wells and William G. Fargo, formed Wells Fargo & Company to provide banking and express services in California. In 1905, Wells Fargo divided its banking and express operations. Henceforth, Wells Fargo bank got merged with the Nevada National Bank and formed the Wells Fargo Nevada National Bank. On the other side, during 1918 wartime measure, the US Federal Government nationalized Wells Fargo express franchise into a federal agency which later on known as the US Railway Express Agency. The history of Wells Fargo has a long list of various mergers and acquisition.

Services and Operations

Wells Fargo has its three different business segments, those are:

1. Community Banking

2. Wholesale Banking

3. Wealth, Brokerage and Retirement

It has banking services throughout the world.

Lawsuits, fines and controversies

• 1981 MAPS Wells Fargo embezzlement scandal
• Higher costs charged to African-American and Hispanic borrowers
• Failure to monitor suspected money laundering
• SEC fine due to inadequate risk disclosures
• Lawsuit regarding excessive overdraft fees
• Violation of New York credit card laws
• Tax avoidance and lobbying
• Insider trading case
• Account fraud scandal
• Failure to comply with document security requirement

Current Financial Condition (2017)

Revenue-	US$88.389 billion (2017)
Operating income-	US$27.377 billion (2017)
Net income-	US$22.183 billion (2017)
Total assets-	US$1.952 trillion (2017)
Total equity-	US$206.936 billion (2017)
Owner-	Berkshire Hathaway (10%)

1. Wells Fargo has reported increase in Total Revenue in the 3rd quarter 2018 by 0.72 % year on year, whereas the revenue growth of its competitors was reported on an average of 9.87 %, for same quarter.

2. On the other side, company reported with net margin of 27.75 % which is higher than its competitors.

3. Its Net Income in the 3rd quarter 2018 grew yoy by 30.63%, whereas many of its competitors experienced reduction in net income by -15.87%.

Financials Company Industry

Price Earnings (TTM) 11.13 10.42

Price/ Book (MRQ) 1.33 1.22

Price/ Cash Flow (MRFY) 8.47 10.34

Dividend Yield 3.59% 3.17%

MRQ = Most Recent Quarter

TTM= Trailing Twelve Months

MRFY= Most Recent Fiscal year