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Financial Case Analysis

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Wells Fargo Bank & Co.

Henry Wells and William Fargo founded Wells Fargo & Company (WFC) in 1852. Wells Fargo (WFC) is a diversified financial services company and one of the United States' top-40 largest private employers. Headquartered in San Francisco, Wells Fargo is decentralized so that every local Wells Fargo store is the headquarters for their customers. The vision of Wells Fargo is to satisfy all their customers' financial needs, while helping them succeed financially, Wells Fargo desires to become known as one of America's great companies and the number one financial services provider in each of their markets.

Today Wells Fargo is the only Moody's "Aaa" rated bank in the United States as well as one of the industry leaders in financial services competing in virtually every segment of the financial industry. Wells Fargo & Company (the Parent) is a financial holding company and a bank holding company. Wells Fargo is a distributor of financial service products via the Internet and other distribution channels across North America and elsewhere internationally. With 11 Executive Officers and 14 Board of Directors, Richard Kovacevich Chairman, President and CEO continues to lead the company into the 21 century by connecting to the past while focusing on the future.

The company is a $420 billion dollar financial services company providing banking, insurance, investments, mortgage and consumer finance to the United States and abroad. WFC strives to provide its customer with many distribution channels 24/7 to achieve anytime, anywhere banking. With over 6000 stores, 146,000 team members, 23 million customers and 1.7 billion common shares outstanding with a market value of $97 billion dollars, WFC is a publicly traded company with listings on the New York Stock Exchange.

The company ranks forth in assets and forth in market value of their stock as of June 30, 2004. The net income for WFC in 2003 was $6.2 billion with earnings per share of $3.69 and diluted earning per share of $3.65 for common stock holders. The return on assets (ROA) was 1.64% while the return on common equity (ROE) was 19.4%. The ratio of common stockholders equity to total assets was 8.89% while the efficiency ratio was 60.6%. The net interest income on taxable-equivalent was $16 billion with a yield of 5.08%. Non-interest income was $12 billion while the non-interest expenses totaled $17 billion.

External Analysis helps banking, insurance, investment and credit executives understand emerging trends and how consumer attitudes will effect the adoption of new products and services. The recent years have found the financial services industry leveling out after a not so well few years in 2000-2002. However, the stock markets are crawling back, regaining some ground from spectacular losses. Interest rates remained quite low, although up from a low point which occurred in June 2003.

Economic trends help major companies and financial services decide how to diversify their investments during hard times. In an ever-increasing effort to expand market share, major banks and financial firms have started to diversify and to offer as many financial services as possible, thereby amassing more revenue from existing clients and new clients alike.

Branch banking is exploding across the country. Banks, which had formerly invested heavily in online banking, have learned that customers also demand the convenience of neighborhood branches and drive-up windows. Banks are improving their e-commerce sites while pouring capital into increasingly branch locations. In Chicago alone, for the 2002-2004 period, Bank of America planned to open 50 branches, Washington Mutual planned 70 new branches and BankOne planned 13. Nationwide, Bank of America leads the pack with 350 new branches planned to open for 2003-2004. Washington Mutual planned to open a total of 240 branches during 2003. Since the collapse of the Internet boom, bricks and mortar are once again a focus for expansion, despite the fact that the popularity of online banking is growing rapidly. Banks promote economic advancement for everyone and strive to be active community leaders in economic development with services that promote self-sufficiency, education and social services

Social trends are a good analysis for these major companies. Since, banks and financial services open themselves to legal and reputation risks if they are unable to provide a consistent, timely, high standard service in accordance with the expectations they have set for the costumer base. As we know it, society is becoming increasingly technology literate. This is no longer restricted to the young who have been brought up to play with a variety of electronic games. For this reason, the demand for a better deal type of service is always at stake. In this time, all ages of people can be found using telephone banking, ATMs, etc. With the predicted high growth of the Internet, an ever-increasing percentage of the population will become accustomed to using it for information access and for shopping. Continued technological innovation will enable banks to extend their targeted customer base in existing and new markets.

Technological trends in existing banking and financial institutions as well as new entrants have exploited technology innovation and the growth of competition into the sector. There is now a greater range of products and services available and accessible to both retail and wholesale finance markets. As we speak, there is a digital revolution that is delivering more media rich information into our homes and when we are on the move. E-business or E-banking, delivers consumer a new array of new services through additional capabilities. E banking is the use of electronic channels to communicate and transact business with both domestic and international costumers primarily with the Internet and the World Wide Web. This new technology has enabled banks and other financial institutions to increase the use of electronic channels for receipt and delivery of their goods and services.

Industry Analysis: With every effort to expand market share, major banks and financial firms are diversifying to offer as many products and services as possible. Merrill Lynch, an excellent case, was once a financial giant and undisputed global leader in Investment banking and brokerage business. Today, the company is facing fierce competition in the brokerage business, particularly from discount brokers, and the investment banking business. Now, all these firms offer a vast variety of services and financial products.

Market Analysis: Success in financial services depends on a combination of strategies and good old fashion ability to please a customer. If the institution is to be a winner, then it has to work hard on the strategic



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