Financial Research Project Company: Wells Fargo & Company (WFC) Business Finance 330 7380 Eboni Lee July 27, 2015 In 2014, Wells Fargo Company was reported as the largest public company in the world (Forbes.com). The financial performance research based on this company sparked an immediate interest due to their financial leadership and dominance in the banking industry. As a former customer of Wachovia, which was later acquired by Wells Fargo Company in 2008, I have personally been impressed with their broad range of services and expertise. This analysis report will examine key metrics in the banking industry, financial performance, and the future outlook for this company based on key financial ratios. Background and Industry Wells …show more content…
The ROA ratio also indicates how efficient an organization is operating to generate earnings. WFC’s ROA was reported as 1.41% in 2014. This is higher than BAC’s 0.53% which supports the fact the Wells Fargo and Company was a more profitable company in 2014. The return on equity ratio (ROE) provides investors with insight on how well an organization manages the equity contributed by shareholders. ROE captures the revenue generated from shareholders. In 2014, WFC’s ROE was 12.58%, 7.88% more than BAC’s ROE. Therefore, the higher ratio indicates WFC’s operates more efficiently by managing shareholder’s investments and as a result has increased profitability for the organization as a whole. The final ratio to measure is the return on revenue ratio (ROR). The return on revenue (ROR) is tool for measuring the profitability performance of a company from year to year. This ratio compares the net income and the revenue. The only difference between net income and revenue is the expenses. An increase in ROR is means that the company is generating higher net income with lesser expenses (investorguide.com). WFC’s reported ROR was last reported at 2.02% compared to BAC’s …show more content…
One way for Wells Fargo & Company to improve their return on equity is for management to increase services offered or their assets. For example, interest earned on assets such as loans and securities will help increase profit for the bank. Wells Fargo and Company can also leverage liabilities to pay for more valuable assets that will yield profits. Leveraging liabilities or capital for viable assets is also another strategy to increase return on equity. Financial Conclusion Performance The success of WFC can be attributed to their multitude of services and partnerships. Wells Fargo and Company specializes in mortgages, retirements, banking services, banking and relationships with countries outside of the US. Their cross selling capabilities for customers and diversified earnings across business segments can also be added to their achievements. By contrast, there are opportunities for improvement in their weaknesses. WFC has limited international relationships. There is opportunity to increase capital and ROE by acquiring international customers. The economic crisis affected many banks including WFC and as a result, the housing market was negatively impacted. The weakening asset quality among real estate exposure is another opportunity for improvement for the company’s mortgage