An Analysis of Wells Fargo & Company (WFC)
October 10, 2022
Wells Fargo (WFC) is a major Western and Western central bank offering a wide range of financial services to more than 23 million customers, with more than 150,000 employees in more than 6,000 locations across the country.
The company continues to buy more than half of its interest income (about 26 billion yen), but its business is not limited to buying deposits and loans. Wells Fargo is also actively involved in other activities, such as brokerage, asset management, and investment banking. The company also manages venture capital.
Wells Fargo's average return on assets over the past decade was 1.57% and its return on equity was 18.19%.
Wells Fargo is inextricably tied to California in the minds of most investors. The company currently operates in 23 different states. However, California's concentration remains.
California mortgages account for about 14% of Wells Fargo's total loan portfolio, and commercial real estate loans in California account for 5% of the company's total loans, and no other state accounts for a similar proportion of total loans.
Wells Fargo's cross-selling approach is well known. The company's goal is to double the number of products owned by Wells Fargo's consumer and business customers, with eight products per customer (currently four products per customer). this must be achieved.
Cross-selling increases customer investment and also helps increase profitability by reducing revenue costs.
Wells Fargo President and CEO Richard Kovacevich explained the importance of cross-selling in the Vision and Values section of the company's website.
What we call cross-selling, or "demand-driven sales," is our most important strategy. Why? This is because it is a "profitability growth" business model. This is similar to the "network effect" of e-commerce. Increase your capabilities geometrically. The more you sell to your customers, the more you'll get to know them. The more you know, the easier it will be to sell more products. The more products a customer has, the higher the value and the greater the loyalty. The more I am with you, the more likely it is that I will be able to meet your financial needs even more. The more profit you sell, the more profit you will sell, as the additional costs of selling other products to existing customers are typically around 10% of the cost of selling the same product to new customers. As an adder, it provides a significant cost advantage over grocery and channel companies. Cross-selling is available at Walmart (general goods), Home Depot (Home Depot), Staples (stationery), as in other aggregators, rethinking the way financial services are added and sold.
While it is difficult to quantify the importance of meeting all the different needs of customers, since missed opportunities cannot be measured, it is clear that the lower interest of each client in competing services will significantly improve the long-term profitability of the companies involved in any activity. Assets, as well as banks.
Later, in the same part of the site, Kovačević mentioned the importance of customer compliance.
Cross-selling is the most important sales metric related to the customer. We want to get 100% of our customers' business. The more products a customer has on Wells Fargo, the better the business, the higher the loyalty, the more time they will spend with the company, and the better the retention rate. The 80% increase in revenue is to sell more products to existing customers.
This concern for protection is an important part of Wells Fargo's long-term plan to keep asset and equity returns above average. Higher profitability is the result of diversifying products and services from those of competitors. Increasing customer loyalty and reducing "comparison purchases" is key to maintaining excellent profitability.
Some companies have an enviable economy because of the natural visibility of their products in the minds of their customers. Most companies are obsessed with market share. But how many people really think about "general thinking"? Apparently, products like Coca-Cola (KO), Hershey (HSY) and Storm Rack create positive attitudes in the minds of consumers.
For many, these products will stand out in every customer's mind (compared to other products and services they can spend money on). Other companies have a healthy psychological commitment, and there is no positive correlation. Gecco is the most obvious example. The company's brand resembles the term "auto insurance." Of course, that's all the GEICO brand does.
What does this have to do with Wells Fargo? Joining the mind is not just the result of sensory advertising. In fact, in most cases, showing ads can't replicate the results created by a direct, differentiated experience. Today, the entertainment industry is a leader in the general consciousness. Those who have seen and loved Star Wars remember this movie. In fact, they not only remember the movie, but also store it in their minds in countless (or rather, crossed) ways.
The evidence in this example abounds. There have been countless references to Star Wars in other media. The title, the music, the introductory text and countless other elements can be recognized at the same time. Even the movies that Star Wars fans hate make more money than almost any other movie in movie history, it's been decades since their initial release. Therefore, it is clear that Star Wars has a solid idea that every company should pursue if it always wants windfall profits.
Unfortunately, most companies, no matter how well they perform, don't deliver on this psychological promise. The products and services they offer have never been as diverse and memorable as they are in movies. It is also important that there is no positive correlation just because the product or service itself is not interesting, fun or enjoyable. Financial services are clearly taking place.
So what can financial services companies do to increase their stake in the mind? The most obvious strategy is to simply "surprise" your customers. In fact, wells Fargo's CEO discussed this choice in the Vision and Values section of the company's website.
"Glayalos!" We all know what it is because we are all customers. We go to cleaning services, we go to grocery stores, we go to restaurants and other places, we are in an "impressed" situation. I went out and said these people were really listening to me and helping me get what I needed. For example, we all know that people who pack a grocery store have a relationship with a customer, so we've heard of a customer choosing a supermarket line: smiling, greeting the customer with their name, and asking how their family is doing. When a personal banker assists the client at one of the branches, or when the client can get help over the phone from the bank or use wellsfargo. When you operate at COM, you want me to say, "That's great." I can't wait to tell anyone.
Financial services are companies where associations tend to be more informed, categorical and hierarchical than associations formed by companies with multiple brands. Information can be returned at any address. For example, a customer can usually think of "bank" and "Fargo wells," but "Wells," if asked to call "Fargo," can also return to the word "bank." This classification gives Wells Fargo authority (limited importance to give.
In other words, providing a wide range of financial services makes sense for providers as they combine deposits, loans, credit cards, insurance, brokerage services, asset management, etc. Thanks to this mindset, wells Fargo's positive experience greatly influences a customer's willingness to pay for additional services, even if it's not as similar.
The three key elements here are fargo's broader definition (not just a bank, but a place to make money), a positive experience, and a consistent confidence in the quality of its services. This last requirement is natural for the customer to believe that a positive experience is not good, so dinner can be more easily satisfied, since it is assumed that the good food you eat in a particular restaurant is not caused by the selection of the best menu offers. Dinner generally assumes that the overall quality of individual restaurant entrances is excellent. Similarly, Wells Fargo's good experience products and services are popular with others.
Wells Fargo's stock price is just over 3%. The share's trading price is slightly below 2.75 relative to book value, and the P/O ratio is less than 15.
Wells Fargo shareholders have surpassed the S&P 500 over the past 5, 10, 15 and 20 years. WFC's figures at the end of last year were 17% over the past decade and outperformed the S&P 500 over the past 20 years, compared with 9% for the S&P: 21% to 12%.
Wells Fargo is the only Bank of America to have achieved Moody's highest credit rating, and Wells Fargo is also a known majority shareholder, which is Berkshire Hathaway's largest shareholder. Year.
Wells Fargo aims to achieve double-digit revenue and profit growth by managing an asset return of at least 1.75% and a return on equity of at least 20%. Both goals are very ambitious. The company's return on assets and capital is the highest of all major U.S. banks. However, if Wells Fargo wants to achieve these goals, it may be necessary to increase the percentage of revenue that comes from acquisition operations.
In the coming years, the company is likely to become a more diversified financial services company. In fact, that's what I do. The company's commitment to cross-selling is not a temporary pastime. Ultimately, this commitment will change investors' perceptions of Wells Fargo. Soon it can be considered more than just a bank.
Wells Fargo's CEO believes his company's P/E is too small. Wells Fargo has a long history of stable growth and profitability. So why should its value be similar to that of most other banks? Shouldn't we give multipliers depending on the company we are developing?
In fact, this topic has several meanings. Wells Fargo is very beneficial for banks. Often, banks are at a disadvantage due to future growth, which seems to think they will get a very high return on assets and capital over the years. These banks tend to be smaller than their competitors and focus on a specific geographic location. The acquisition weakens the excellent profitability of the bank's position.
Of course, there are also many additives in the banking industry. Unfortunately, many of these banks have a history of not receiving the assets and stocks that Wells Fargo has achieved. More importantly, there is a slight difference between these banking giants and their domestic competitors. Therefore, their trenches are very suspicious.
Wells Fargo is a special type of bank with a proven track record of superior growth and profitability, with two distinct capabilities: geographic expansion and cross-selling.
Wells Fargo franchises have a lot of value, and this franchise is one of the great strengths of the financial services industry, with ample room for future growth where growth constraints are almost non-existent under the right model.
If Wells Fargo is a growth game, then it's a special development promotion. Maybe that will put Buffett first in the company. It is a company with a strong franchise that can evolve over the years. Perhaps most importantly, it's a growing business, and in many cases it trades in multiples on the market just because it's a bank.
At today's market prices, Wells Fargo is an investment it has forgotten, and valuation isn't cheap enough to guarantee good profitability if the company falters. However, because the company is so suspicious, the margin of safety is provided by a low P / E. Working with certain events is a margin of safety.
As for another topic, I would encourage anyone interested in competitive advantage to read the entire Vision and Values section of the Wells Fargo website.
At first glance, this is similar to any other online demo for investors. In fact, it doesn't look like those empty, sweet presentations. It's actually an interesting pursuit of competitive advantage in an industry that looks completely different than the brand typically associated with a strong franchise for consumer-facing industries. Even if you are not particularly interested in banking, we recommend that you read this section to understand how to learn about psychology and customer behavior.
Gecco # #Wells #Fargo #amp #Company #WFC