WELLS FARGO

Stock Research Assignment

Kelsey LeVert
Managerial Finance September 6, 2011 Cohort 14

Company Overview
Wells Fargo & Company (NYSE: WFC) is an American multinational diversified financial services company with operations around the world. [1] Wells Fargo is the fourth largest bank in the US by assets and the second largest bank by market capitalization.[2] Wells Fargo is the second largest bank in deposits, home mortgage servicing, and debit card. In 2011, Wells Fargo was the 23rd largest company.[3] In 2007 it was the only bank in the United States to be rated AAA by S&P, though its rating has since been lowered to AA- in light of the financial crisis of 20072010.[4] Wells Fargo in its present form is a result of an acquisition of California-based Wells Fargo & Company by Minneapolis-based Norwest Corporation in 1998 and the subsequent 2008 acquisition of Charlotte, NC-based Wachovia. Although Norwest was technically the surviving entity in the 1998 merger, the new company renamed itself Wells Fargo, capitalizing on the 150year history of the nationally-recognized name and its trademark stagecoach. Following the acquisition, the company transferred its headquarters to Wells Fargo's headquarters in San Francisco and merged its operating subsidiary with Wells Fargo's operating subsidiary in Sioux Falls. Wells Fargo has not always been the most ethical company regarding policies. Illinois Attorney General Lisa Madigan filed suit against Wells Fargo in 2009 alleging that they steer African Americans and Latinos into high-cost subprime loans. In August 2010, Wells Fargo was fined by a U.S. District Judge for overdraft practices designed to "gouge" consumers and "profiteer" at their expense, and for misleading consumers about how the bank processed transactions and assessed overdraft fees.[5] They have, however, made shrewd acquisitions and strategically held a strong market position in spite of a banking crisis. In a speech delivered to the Stanford Graduate School of Business in 2009, then-Wells Fargo CEO Dick Kovacevich stated that he believed Wells Fargo Securities would be among the top five investment banks in the 'next few years.' [6] Current CEO John Stumpf said that investment banking had changed a lot, that Wells now had fewer competitors and was a bigger company with more clients who need capital market access. [7] According to Jonathan Weiss and Robert Engel, co-heads of investment banking and capital markets, the group intends to grow by 10% to 20% per year for the foreseeable future. Wells Fargo is one of the Big Four banks of the United States with Bank of America, Citigroup and JP Morgan Chase.[8]

Kelsey LeVert: Company Overview

Stock Performance
On October 28, 2008, Wells Fargo and Company was the recipient of $25B of the Emergency Economic Stabilization Act Federal bail-out in the form of a preferred stock purchase. Tests by the Federal government revealed that Wells Fargo needs an additional 13.7 billion dollars in order to remain well capitalized if the economy were to deteriorate further under stress test scenarios. On May 11, 2009 Wells Fargo announced an additional stock offering raising $8.6 billion in capital. They plan to raise the remaining $4.9 billion in capital earnings. On Dec. 23, 2009, Wells Fargo redeemed the $25 billion of series D preferred stock issued to the U.S. Treasury under the Troubled Asset Relief Programs Capital Purchase Program. As part of the redemption of the preferred stock, Wells Fargo also paid accrued dividends of $131.9 million, bringing the total dividends paid to the U.S. Treasury and U.S. taxpayers to $1.441 billion since the preferred stock was issued in October 2008.[9] Wells Fargos earnings per share or EPS (the number of dollars earned during the period on behalf of each outstanding share of common stock according to Gitman) are 2.58. Also, according to Gitman, the P/E ratio measures the amount that investors are willing to pay for each dollar of a firms earnings. Wells Fargos P/E ratio is 9.67. Their 52 week range is 22.58 to 34.25 as indicated by the chart below. [10]

Kelsey LeVert: Stock Performance

Recommendation
Based on Wells Fargos P/E ratio, based on its position in the banking industry and the companys potential for growth, I would recommend having some of its stock based on a purely numbers-based, business decision. Based on the chart below, Wells Fargo stock is considered one of the top 10 stocks to own and is owned by so-called super investors. It has performed consistently well over the past two years and ranks nicely among some of the biggest Blue Chips in the market. Wells Fargo seems to be emerging as a leader in the banking industry and a top performer. It would seem a prudent choice to include it in ones stock portfolio.

Kelsey LeVert:

Bibliography
1. 2. 3. 4. 5. 6. Wells Fargo History. Wells Fargo History. http://money.cnn.com/magazines/fortune/fortune500/2011/full_list/ Rakesh R.S. Garia (April 13, 2010). "2010 Form 10-K, Wells Fargo & Company". United States Securities and Exchange Commission. http://www.sec.gov/Archives/edgar/data/72971/000095012311018541/f56816exv13.htm. "Wells Fargo & Company: NYSE:WFC quotes & news Google Finance". Google. http://www.google.com/finance?q=NYSE:WFC. Illinois Files Bias Suit Against Wells Fargo", Reuters, July 31, 2009] "S&P Downgrades Wells Fargo, U.S. Bancorp, Other Banks". BusinessWeek. June 17, 2009. http://www.businessweek.com/investor/content/jun2009/pi20090617_892748_page_2.htm. Wells Fargo CEO: "What I've Learned Since Business School" Date 9 Nov 2009 http://blogs.wsj.com/deals/2011/04/11/warren-buffett-seal-of-approval-goes-to-wells-fargobankers/?mod=WSJBlog Warren Buffett Seal of Approval Goes To Wells Fargo Bankers? Date 11 Apr 2011 Winkler, Rolfe (September 15, 2009). "Break Up the Big Banks". Reuters. http://blogs.reuters.com/rolfewinkler/2009/09/15/break-up-the-big-banks/. Landler, Mark and Dash, Eric (October 14, 2008). "Drama Behind a $250 billion Banking Deal". The New York Times. http://www.nytimes.com/2008/10/15/business/economy/15bailout.html

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10.http://finance.yahoo.com/echarts?s=WFC+Interactive#chart1:symbol=wfc;range=1d;indicator=volume;chartt ype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Kelsey LeVert: