The Basics of Wells Fargo

By Amanda Alix
September 13, 2012

For well-nigh 20 years now, the Motley Fool has been here to help you invest better and smarter, using spot-on analysis and razor-sharp wit. To celebrate Worldwide Invest Better Day on September 25, we're taking some time to get back to the basics -- of investing, that is. In that spirit, I have rounded up some sweet financial sector stocks that have been showing some real investing mojo lately.

Without further ado, let me introduce you to the focus of this particular article:  longtime banking icon, Wells Fargo(NYSE: WFC  ) .

A bank with historical perspective and a drive to succeed
Founded in 1852 in New York by Henry Wells and William Fargo, Wells Fargo & Co. provided express mail and banking services to frontier California. Originally employees of the American Express Company, the two men saw gold in their futures, and formed their own business to cater to gold miners. The first office out west was housed in San Francisco, and soon spread to other boom towns.  When Wells was purchased in the late 1990s, the new owners obviously felt the tug of history, keeping the name of the company the same, and re-situated their main offices to San Francisco.

Although the big banks have enjoyed somewhat of a rally in recent weeks, the four years since the financial crisis has definitely cramped their style. Where some have pulled back from some lucrative aspects of banking, Wells has jumped right in. As big boys Bank of America (NYSE: BAC  ) , JP Morgan Chase (NYSE: JPM  ) , and Citigroup (NYSE: C  ) have retreated from writing mortgages in the years since the meltdown, Wells has corralled a full one-third of this market for itself. Although the bank has attracted criticism for its heavy involvement in the mortgage business from both regulators and lawmakers, Wells recently defended its position, noting that they have worked hard for their piece of the pie. Managers have even used the Old West motif at sales meetings to push for more loan business -- by dressing up as cowboys.

Wells is pushing its way into other loan markets, too. Noting the increase in housing activity, it has opened new loan offices in Bank of America’s hometown of Charlotte, North Carolina. The bank is not only ready and willing to loan to home builders, but is actively seeking out new business in the area.

Likewise, Wells has been tapped by General Motors (NYSE: GM  ) to service the financing needs of GMC, Chevy, Cadillac, and Buick dealers in the western United States, causing troubled Ally Financial, which already has a relationship with GM, to shake in its boots. Spurred by this recent success, Wells is pushing GM for an even larger share of its loan business.

The bank’s Q2 report showed only a slight increase in revenues year over year, but deposits were up, and loan activity strong. In addition, Wells recently paid out a nice $0.22 per sharedividend, which shows signs of trending upwards again, after a slowdown last year.

A bank that sticks to its roots
The Wild West spirit is still part and parcel of the Wells Fargo mystique, and the drive to prosper helps explain why this bank has weathered so many storms throughout its long history, and has become a favorite of well-regarded investors, like Warren Buffett. When it comes to staying power, it’s hard to beat this company -- something that long-term investors can tip their hats to.

http://www.fool.com/investing/general/2012/09/13/the-basics-of-wells-fargo.aspx

Wells Fargo & Company Company Snapshot

Business Description: Wells Fargo & Company operates in the National commercial banksonline bookonline book sector.  Company with three other companies in this sector in the United States: JPMorgan Chase & Co. (2011 sales of $110.91 billion of which 24% was Retail Financial Services), Bank of America Corporation ($107.24 billion of which 22% was Global Banking & Markets), and Citigroup Inc. ($103.31 billion of which 32% was Consumer Banking). 

Sales Analysis. Wells Fargo & Company reported sales of $88.31 billion for the year ending December of 2011. This represents a decrease of 6.2% versus 2010, when the company's sales were $94.19 billion. Contributing to the drop in overall sales was the 7.3% decline in Community Banking, from $54.70 billion to $50.70 billion. There were also decreases in sales in Wholesale Banking (down 2.5% to $21.67 billion) . However, these declines were partially offset by the increase in sales of Wealth, Brokerage and Retirement (up 3.9% to $12.19 billion) .

Buffett Says U.S. Banks a Class Apart From Europeans

Bloomberg News

By Noah Buhayar, Andrew Frye and Hugh Son on May 05, 2012

 

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Warren Buffett, whose Berkshire Hathaway Inc. (BRK/A) (A) has more than $19 billion invested in U.S. banks, said the lenders have ample liquidity and are a class apart from European rivals.

“I would put European banks and American banks in two very different categories,” Buffett, Berkshire’s chairman and chief executive officer, said today at the firm’s annual meeting in Omaha, Nebraska. “The American banking system is in fine shape. The European system was gasping for air a few months back” before getting assistance from the European Central Bank.

Wells Fargo & Co. (WFC) (WFC) and JPMorgan Chase & Co. posted record profits last year and their CEOs are contesting efforts by U.S. policy makers to strengthen banking regulations. European banks have struggled amid the continent’s sovereign debt crisis and turned to the ECB, starting in December, for extraordinary three-year loans at interest rates of 1 percent.

“I’d like to have a lot of money for three years at 1 percent, but I’m not in trouble,” said Buffett, 81. U.S. banks have “liquidity coming out their ears.”

Berkshire, which Buffett has led for 42 years, is the biggest shareholder of San Francisco-based Wells Fargo, with a more than $12 billion stake. Buffett injected $5 billion into Bank of America Corp. (BAC) (BAC) last year in exchange for preferred stock and warrants. Berkshire’s shareholding of U.S. Bancorp (USB) (USB) was valued at $2.2 billion as of yesterday.

http://www.businessweek.com/news/2012-05-05/buffett-says-u-dot-s-dot-banks-a-class-apart-from-europeans
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Wells Fargo Gives Wall Street a Reason to Run

Wells Fargo Gives Wall Street a Reason to Run

By JACK HEALY and ERIC DASH
Published: April 9, 2009

Stock markets surged higher on Thursday after Wells Fargo, the nation’s largest consumer bank, said that it expected to report record profit for the first three months of the year, kindling hopes that financial companies may finally be closing the book on quarter after quarter of wrenching losses.

As financial stocks soared, the Dow Jones industrial average rose 225 points as trading near a close, crossing above 8,000 points. The broader Standard & Poor’s 500-stock index was 3.5 percent higher, increasing the gains of a bear-market rally that has lifted stocks more than 20 percent since it began one month ago. The technology-heavy Nasdaq rose 3.4 percent.

Just three months ago, Wells Fargo announced that it had lost $2.55 billion as the economy foundered and the bank absorbed billions of losses from the acquisition of the Wachovia Corporation. But a statement on Thursday, Wells Fargo said it expected to report $3 billion in profit for the first quarter of 2009, far exceeding Wall Street’s expectations, and said it was issuing mortgages at a fast clip.

Investors took the statement from Wells Fargo, whose shares gained 20 percent, as another harbinger that the tattered economy may be bottoming out.

Other major banks like Citigroup, JPMorgan Chase and Bank of America, which reported billions in losses last quarter, have said that they expected to be profitable this year, and wisps of less-bad data from the housing market, manufacturers and consumer surveys are giving rattled investors new hopes that a bottom is in sight.

But experts warn that corporate losses are simply radiating outward from financial firms to other corners of the economy, and they say the economy’s thin green shoots and bear-market gains could turn to dust if rising unemployment forces deeper, unexpected contractions in consumer spending and corporate profits.

Analysts expect that earnings for companies in the S.&P. 500 fell 37 percent in the first months of the year, and they say many of the losses will be borne by retailers, energy companies and businesses that make products like chemicals and building materials.

“What you’re now seeing is the nonfinancial segment really start to tail off,” said Nicholas Bohnsack, sector strategist at Strategas Research Partners.

Oil prices settled at $52.05 a barrel in New York trading, up $2.67.

In Asia, Japan’s Nikkei rose 3.7 percent after Japan announced its biggest-ever economic stimulus plan, a $154 billion package of subsidies and tax breaks that aims to stem a deepening recession in the world’s second-largest economy.

In Europe, the FTSE 100 in London gained 1.4 percent, the DAX index in Frankfurt rose 3 percent, and CAC-40 in Paris rose 1.8 percent.

http://www.nytimes.com/2009/04/10/business/10markets.html?_r=1&hpw