Wells Fargo Financial Analysis - Case Study Example

Introduction: Scholars and Financial analysts de that Wells Fargo is one of the largest bank holding companies in the United States of America. This banking organization operates under three major segments, namely brokerage and retirement, community banking, and wholesale banking and wealth (Fradkin, 2002). Well Fargo provides services in commercial, retail and corporate banking, through the internet, banking stores, offices and other channels of distribution (Fradkin, 2002). The customers of this organization consist of institutions and banking organizations in more than 50 states of the US, and also in other countries of the world. Well Fargo also provides other financial services through a variety of subsidiaries that have an interest in mortgage banking, wholesale banking, brokerage services, insurance agency, venture capital investment, and services in mortgage backed securities (Wray, 2013). Wray (2013) denote that Wells Fargo is the fourth biggest banking organization in the United States in terms of the assets that the organization commands. Wray (2013) further goes on to denote that Wells Fargo is the largest bank in the world, in terms of market capitalization. This took place in 2013, when the net worth of the bank was estimated to be $ 236 billion. On this basis, Well Fargo is the most valuable banking brand in the world, and this is reflected in the share prices of the organization at the New York Stock exchange which trades at 46.56 dollars, per share. This paper talks about the history of the bank, and contains a thorough analysis of the ethical standards of the bank, and in relation to how these ethics play a role in influencing the manner in which the bank conducts its operations. This paper also contains the types of accounts and loans that the bank offers. History of the Bank: Wells Fargo was formed in 1852 when an article of association was signed in New York by Well, Fargo, and other business associates (Cariboni, Joossens and Uboldi, 2010). This people created a joint stock company that had a responsibility of providing express and banking services. The company began operation with $ 300,000, and it faced very numerous challenges, beginning with stiff competition from established banking organizations and couriers, to the collapse of the Californian banking system in 1855 (Johnson, 2010). Cariboni, Joossens and Uboldi (2010) denote that the bank was able to survive this panic of banking system, in as much as it made considerable losses which amounted to one third of the net worth of the business organization. By surviving this crisis, the company was able to acquire two advantages. One advantage is that the company did not face any competition from California, and the company was able to build its image as a banking organization that is reliable, and dependable. From the periods of between 1855, to 1866, Wells Fargo was able to expand its business, and engaged in a variety of businesses, which includes communication, transportation, courier services, banking, etc (Cariboni, Joossens and Uboldi, 2010). In 1905, the company was able to separate its express operations, from the banking services that it was offering. It is important to denote that it is during this year, that the company was able to form a merger, between the banking organization of Wells Fargo, and the Nevada National Bank. It is important to denote that the San Francisco earthquake of 1906, presented a significant history for the bank (Cariboni, Joossens and Uboldi, 2010). This is because the earthquake made it possible to be a massive reconstruction process in San Francisco, and the bank was able to attract a massive deposit, which amounted to $ 35 million in a period of 18 months. 1907 was a bad year for the bank, and this is because the bank lost close to $ 1 million per week, for six consecutive weeks (Andrews, 2007). This is because the banking organizations in New York tried to manipulate the share prices, as a result, investors were not able to pay for the various stocks they purchased. The banking organizations were forced to suspend paying for these stocks (Cariboni, Joossens and Uboldi, 2010). It is important to denote that this problem affected the entire banking sector in the United States. Between the periods of 1940, to the year 1970 were good years for the bank. The bank was able to acquire several banking organizations such as the First National Bank situated in Antioch, this was in 1954 (Andrews, 2007). The bank was also able to acquire the First National Bank situated in San Mateo County, and this was in 1955. In 1967, the bank was able to introduce the Master Charge Card (Cariboni, Joossens and Uboldi, 2010). This was for the main purposes of competing with the Bank of America in the lucrative customer lending business. In 1968, Well Fargo was able to change its status from a state banking organization, to a banking organization that was holding the Federal charter (Andrews, 2007). This is because the bank wanted to create subsidiary organization that could engage in equipment leasing, as well as in credit cards business (Fradkin, 2002). This is as opposed to creating a special department within the banking organization that could deal with the problem. In 1968, Well Fargo was able to form a holding company, and the organization was re-named Wells Fargo and Company (Cariboni, Joossens and Uboldi, 2010). In 1973, the bank began to focus on consumer and midsized corporate loans, which had high interest rates, and were profitable for the bank. This made the organization to be able to pay for its debts. The 1980s was a decline in the operations of Well Fargo, with claims of embezzlement of funds. However, the bank was able to regain its ground in the later years of 1990s, with acquisitions and mergers. For instance, in 1995, the bank was able to merge with Norwest. Initially, this merger was a problem, and was characterized by a fall in the share prices of Wells Fargo. It is important to denote that in this merger, Norwest had a superior advantage in terms of financial performance and asset capitalization. However, the tow companies decided to retain the name Wells Fargo because it was easily recognized by the public (Cariboni, Joossens and Uboldi, 2010). It is important to denote that Nor West retained its shares at the stock market, and they continue trading up to now. In 2008, the company was able to buy Wachovia in a pre-stock market deal. The transaction was worth around 15.1 billion dollars, and this made Wells Fargo as one of the largest banking organizations in the United States. Ethical Standards: Wells Fargo always expects its employees to adhere to the ethical standards established by the company, and this is in relation to their interaction with stockholders of the company, customers, vendors, team members, and the community that Wells Fargo serves (Fargo, 2014). Wells Fargo advocates for its employees to act in a manner that is trustworthy and honest. Employees of the organization must also be able to keep confidential information that has the capability of avoiding conflict of interest. One of the ethical standards established by the organization is its commitment to comply with all federal rules, laws and regulations (Fargo, 2014). This also includes all laws that apply to the operations of the organization, from the states, countries of their operations, or localities. This also includes complying with laws that deal with security, accounting controls, accounting standards, and auditing practices (Cariboni, Joossens and Uboldi, 2010). In achieving this ethical standard, Wells Fargo advocates for its employees to have extensive knowledge about their work, carrying out any affairs of Wells Fargo with honesty, and in compliance with the various laws operating in their areas of operation, and also complying with the procedures and policies established by Wells Fargo (Fargo, 2014). The company also advocates for its employees to exercise good judgment in their decision making process. This includes informing the management on problems that occurs within the organization, such as theft, loss or waste of products (Cariboni, Joossens and Uboldi, 2010). This is for the main purpose of ensuring that there is no wastage of the resources of the organization by its employees, or other stakeholders of the organization (Fargo, 2014). The company also requires its employees to report any violations of the ethical code of conduct, and this is their responsibility. The company also requires its employees to work with integrity, honesty, and trustworthiness (Johnson, 2010). The main purpose of this ethical standard is to make the customers of the organization to have confidence, and trust on the organization. On this basis, the management of the organization requires all employees of the organization to follow this ethical standard while conducting the internal and external affairs of the business organization (Fargo, 2014). For purposes of achieving integrity, an employee of the organization must act in honesty. On this basis, the same employee will manage to follow the culture of the organization which requires an employee to act in a manner that is always right (Johnson, 2010). The company also believes that if employees of the organization act in an honest manner, then they will provide accurate information to the customers of the organization (Cariboni, Joossens and Uboldi, 2010). This is a practice that the company advocates for, since being honest with customers will create a positive brand name to the company. It is also important to denote that it is the objective of Wells Fargo to disclose all the information required by shareholders, government institutions, and all stake holders of the company (Berger, 2010). This is in a bid to foster honesty, integrity, and accountability within the organization. The company also requires its employees to keep an accurate record of all transactions, and they should not direct employees of the organization to a wrong product, just for purposes of making sales. This behavior will harm the reputation of the company, and it will also harm the customer under consideration (Cariboni, Joossens and Uboldi, 2010). The company also prohibits any form of gaming, and undue influence for purposes of influencing a person or an individual to handle transactions in a manner that is favorable to the employee of the organization. The company also requires its employees to preserve any confidential information emanating from the customers of the organization, or from the operations of the organization (Cariboni, Joossens and Uboldi, 2010). This code of ethics is based on the fact that customers normally provide confidential information to Wells Fargo. This might include their personal problems and issues, if disclosed, could harm the reputation of the customer (Fargo, 2014). On this basis, the company prohibits bite employees from disclosing such kind of information. Disclosed confidential information from the company could be used by the competitors of the company, against the company. This type of information is referred to as proprietary information. The company also requires its employees to avoid engaging in business that conflict with the operations and businesses of Well Fargo (Singh, 2010). This is termed as conflict of interest. Finally, the company prohibits its employees from engaging in insider trading. This involves the purchase or sale of stocks using information that is not publicly available. Types of Loans and Accounts offered by the bank: The company offers four major types of loans, that is mortgage loans, auto finance loans, home equity loans, and personal and credit loans. Mortgages are to finance the purchase and buying of homes, while home equity loans are to finance the repair of homes, and the buying of other essential products of a house (Fargo, 2014). Auto finance loans are aimed at financing the purchase of movable assets, while personal loans are aimed at financing personal issues of an individual, and it can be paying fees for children, financing medical costs, and other personal issues. The bank offers five major accounts, namely money market account, certificate of deposit, individual retirement accounts, checking accounts, and savings accounts (Fargo, 2014). Checking accounts is aimed at facilitating daily transactional needs, and an individual can use a debit card to either pay bill, or purchase items. A savings account is for savings purposes and money deposited in it, is able to earn interests (Fargo, 2014). A certificate of deposit on the other hand allows an account holder to make investments, and earn interests as a result. Money market accounts on the other hand have some similarities with savings accounts, but their major difference is that they require an account holder to make huge deposits for purposes of avoiding monthly charges. Individual retirement account on the other hand allows an account holder to save money for retirement purposes (Fargo, 2014). Conclusion: In conclusion, Wells Fargo is an organization that has a good reputation, and is one of the most valued business brands in the world. It is important to understand that the company is a multinational company, operating in more than 35 countries of the world, and this includes the continent of Asia, Africa, Europe, and the Americas. Due to the strong brand name that the company has, this company has a very strong presence in the capital markets, and its shares are always stable, trading at $ 49. On this basis, it is one of the companies that I would encourage investors to invest in. It is important to denote that most people investing in stock normally consider the history of the company, the nature of business, and if the company is stable. Wells Fargo has a good history, and its business operations are stable. References: Andrews, D. (2007). Luke Dawson: Wells Fargo gun. New York: Avalon Books. Berger, A. N. (2010). The Oxford handbook of banking. Oxford: Oxford University Press. Cariboni, J., Joossens, E., & Uboldi, A. (2010). The promptness of European Deposit Protection Schemes to face banking failures. Journal of Banking Regulation, 11(3), 191-209. Fradkin, P. L. (2002). Stagecoach: Wells Fargo and the American West. New York: Simon & Schuster Source. Johnson, C. E. (2010). Wells Fargo History Museum, Portland. Steve Greenwood, curator. The Public Historian, 32(4), 149-152. Singh, S. (2010). Handbook of business practices and growth in emerging markets. Hackensack, NJ: World Scientific. Fargo. (n.d.). Wells Fargo. About Us. Retrieved April 7, 2014, from https://www.wellsfargo.com/ Wray, L. R. (2013). What Do Banks Do? What Should Banks Do? A Minskian Perspective. Accounting, Economics and Law, 3(3), 244-251. Read More