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Wells Fargo Case Analysis

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Annette Garcia

Mikey Tran

Thy Nguyen

Omar Ennabe

April 24, 2007

Wells Fargo & Co. is a diversified financial services company in the United States with consumer finance subsidiaries doing business in Canada and Puerto Rico.

Headquartered in San Francisco, California, Wells Fargo is a result of a merger between California-based Wells Fargo & Co. and Minneapolis-based Norwest Corporation in 1998. The new company chose to keep the name Wells Fargo, to capitalize on the 150 year history of the nationally recognized Wells Fargo name and its trademark stagecoach.

Wells Fargo & Co. is one of the United States top-40 largest private employers. They ranked fifth in assets and fourth in market value of their stock among their peers.

As of December 31, 2006, Wells Fargo has 6,062 retail branches, over 23 million customers, and 158,000 employees.

The company credits its success to its diversified financial services shown below.


On March 18, 1852, in New York City, Henry Wells, William Fargo and others signed an article of association for a joint stock company to do banking and express business in distant California. The company opened its first office, in San Francisco, in July 1852.

In 1853, the immediate challenge that faced the presidents of the company (Morgan and Barney) was to try and establish the company in two highly competitive fields under conditions of rapid growth and unpredictable change. At the time California did not regulate the banking or the express industry so both fields were wide open. Because it was so easy for anyone to establish a bank, Wells Fargo actually entered the market pretty late and faced well established competition.

From the beginning, Wells Fargo offered diverse and mutually supportive services: general forwarding and commissions; buying and selling of gold dust, bullion, and specie (or coin); and freight service between New York and California.


During this time Wells Fargo expanded rapidly. It became the West's all-purpose business, communications, and transportation agent. The company developed its own stagecoach business, helped start and then took over the Overland Mail Company, and participated in the Pony Express. In 1866 when Wells Fargo consolidated under its own name the ownership and operation of the entire overland mail route between Missouri River and the Pacific Ocean and many stagecoach lines in the western states.


In 1904 Wells Fargo & Company Express moved to New York City. And in 1905 Wells Fargo separated their banking and express operations. Then in 1918 the government forced Wells Fargo Express to consolidate its domestic operations with those of the other major companies. In late 1923, Wells Fargo Nevada National Bank merged with Union Trust Company, to form the Wells Fargo Bank & Union Trust Company.


The war years were uneventful and prosperous for Wells Fargo. In the 1950's the grandson of Wells Fargo's President I.W. Hellman III, acquired two San Francisco Bay area banks and opened a small branch network around San Francisco. In 1954 the name of the bank was shortened to Wells Fargo Bank.


In 1960 Wells Fargo Bank merged with American Trust Company to form the Wells Fargo Bank American Trust Company. This was a merger between two of California's oldest banks which created the 11th largest banking institution in the United States. It was renamed again in 1962 to Wells Fargo Bank. In 1967 Wells Fargo together with other three banks introduced a Master Charge Card (now Mastercard) to its customers as a plan to compete with Bank of America in the consumer lending business. In 1968 Wells Fargo changed from a state to a federal banking charter. When the charter conversion was completed in 1968, the bank again renamed to Wells Fargo Bank, N.A.


Wells Fargo Domestic profits grew faster than those of any other U.S. bank between 1970 and 1975. Wells Fargo investment services became a leader in the late 1970's. They had aggressive marking strategies targeting medium size corporations and consumer business loans. By the end of the 1970's their growth slowed somewhat. In 1980 the new chairman said "It's time to slow down. The last five years have created too great a strain on our capital, liquidity, and people."


In 1981 the banking industry was shocked by the news of a $21.3 million embezzlement scheme by a Wells Fargo employee. It was one the largest embezzlements ever. In the early 1980s there was a sharp decline in Wells Fargo's performance. They had to recover from there loss and had to eliminated branches and cut 3,000 jobs. In 1986 Wells Fargo purchased rival Crocker National Corporation. This acquisition was a great move for Wells Fargo. Crocker doubled the strength of Wells Fargo making it the tenth largest bank in the United States. Concentrating on California as their target market Wells Fargo was a successful strategy.


During this time Wells Fargo was loaded with a lot of debt stemming from the risky real estate loans from the 1980s. However the bank had improved their loan-loss ratio. Despite the poor economy in the early 1990s, Wells Fargo had healthy gains.


In late 1995, Wells Fargo began a pursuing a hostile takeover of First Interstate Bancorp. Wells Fargo but a bid in for $10.8 billion but then other banks came and tried to bid as well. First Interstate Bancorp ran into regulatory difficulties with the way it had structured its offer. There were then talks between Wells Fargo and First Interstate which led to a merger agreement. The merger turned out to be disastrous; computer glitches led to lost customers deposit and bounced checks. There was also a culture clash between the two banks and their customers. The financial performance of Wells Fargo suffered



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