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Analysis of wells fargo
Analysis of wells fargo
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Here the selected firm is a bank and hence the conventional ratios may not hold the same significance as it does for the firms in other industries. For a bank the deposits is their liabilities and hence the loans which banks gives are their assets. Thus the bank balance sheet will consist of only the deposits and the loans. Hence the current ratio will not make the same sense as it does for other firms. The current ratio of the firm is 0.209. Since the bank does not have inventories and other short term assets, quick ratio cannot be calculated or is the same the current ratio since there are no inventories. Also the cash ratio is also the same as the current ratio for the reasons mentioned above (Wells Fargo, 2014). Wells Fargo debt to equity …show more content…
Net margin for the Citi is 17% which is less than the 26% for Wells Fargo. Also the earning per share is 4.35 which is less than the Wells Fargo. Return on equity is 7.02% is higher for Citi. Here we have analyzed the ratios of the two main competitors of Wells Fargo. Wells Fargo is ahead of its competitors in most of the ratios and is poised to become one of the largest banks. Overall Financial Effectiveness Wells Fargo financials are very healthy and their financial performance over the past few years have been impressive. In the year 2008 when most of the banks were suffering from aftermath of crisis, Wells Fargo was insulated from the crisis since their investments in the subprime mortgage was not significant. Thus they were the few banks who were prudent in their approach and they did not join bandwagon. Prior to the crisis many of the banks were making huge money and were getting sucked into the crisis. However the firm did not participate in the blind rush and thus were safe from the defaults of the subprime loans. Thus this shows that the management is financially prudent and are clear about their …show more content…
In the year 2008 it was one of the few large banks which was unaffected by the crisis. Analysts are bullish on Wells Fargo since it has strong fundamentals and has a strong brand name. Banking depends a lot on the trust which the customer has on the bank. Wells Fargo is one of the most trusted banks because of its service and its strong customer focus. Also in the last few years it has concentrated more on its core banking solutions giving it edge over its competitors who have been struggling the aftermath of its crisis. Also US economy has shown a strong resilience in the last few quarter and the economy is seeing signs of revival. The unemployment numbers have been promising and the Federal Reserve have started giving hints on the taking back the quantitative easing. This can also been seen in the S&P trend which has risen significantly over the past months. This is signaling the revival of the economy. As a result banks are supposed to increase as their activity will increase if the economy grows. Banks started to increase as there is more economic lending and hence the profitability of the banks
Seidman, L. W. (1986) Lessons of the Eighties: What does the evidence show? Retrieved July 25, 2010 from http://www.fdic.gov/bank/historical/history/vol2/panel3.pdf
Based on the contingency continuum theory the bank was on the pure accommodation side by doing full apology, by being honest and communicating it to the public. " Stumpf, who will testify at the Sept. 20 hearing, said he was sorry about the scandal. “We deeply regret any situation where a customer got a product they didn’t request,” Stumpf said during an appearance on CNBC’s “Mad Money” on Tuesday." (Puzzanghera, 2016). Then, always following the apology and restitution strategy Wells Fargo put his public first by doing paying full compensation to them. According to Egan, Wells Fargo has reached a $110 million preliminary settlement to compensate all customers who claim the scandal-ridden bank opened fake accounts and other products in their name. Furthermore, they also did some corrective actions by eliminations retail sales goals. “The elimination of product sales goals represents another step to reinforce our service culture, helps ensure that nothing gets in the way of our ability to achieve our mission and is consistent with our commitment to providing a great place to work,” he said. The sales goals will be eliminated starting Jan. 1, Wells Fargo said." According to Puzzanghera, 2016. Concerning, the corrective action the bank went beyond the elimination of retail sale goals they also fired some employees, paid their fined toward the regulatory bodies including the Consumer Financial Protection Bureau(CFPB) and the
Key stakeholders are owners, directors, employees, and the community that the organization draws it resources businessdictionary.com,2016). Out of the 1000 Wells Fargo customers that were surveyed 3% stated that they were personally affected by the scandal and 14% of them stated that they have changed banks while 30% of them were currently looking to switch. Studies predict that Wells Fargo could lose about $99 billion in deposits and $4 billion in revenue because of customers rejecting to do business. Individual customers weren’t the only ones that were affect by the scandal but similarly 10,000 small businesses (Razin, 2016). I believe that the owners will be affected as well because of profit losses that will eventually affect Wells Fargo shares and the employees were affected after 5,300 of were fired (Razin,
Wells Fargo & Company is an American public company which deals with banking and financial services headquarters in San Francisco, California. It is the word second largest bank in the market capitalization and ranked as the third largest in the U.S in terms of its assets.
Their entire vision statement is based upon a very simple premise that states, “Customers can be better served when they have a relationship with a trusted provider that knows them well, provides reliable guidance, and can serve their full range of financial needs” (Wells Fargo: Leadership, 2017). Their goal was to become the financial service leaders in customer service and advice, team member engagement, innovation, risk management, corporate citizenship, and shareholder value. The bank was moving in a very good direction until they made headlines for opening a large number of unauthorized fraudulent accounts (Corkery,
Looking at the individual ratios seen in exhibit 1 and comparing it to the industry average shown in exhibit 2 gives a sense of where this company stands. Current ratio and quick ratio are really low and have been decreasing. For 1995, the current ratio is 1.15:1, which is less than the industry average of 1.60:1, however to give a better sense of where this stands in the industry, as seen in exhibit 3, it is actually less than the average of the bottom 25% of the industry. The quick ratio is 0.61 is less than the industry is 0.90. Both these ratios serve to point out the lack of cash in this company. The cash flow has been decreasing because, it takes longer to get the money from customers, but the company still needs to pay for its purchases. Also, the company couldn’t go over the $400,000 loan limit, so they were forced to stretch their cash.
In March of 1852, Henry Wells and William Fargo established the well-known bank, Wells Fargo. Originating in the West, Wells Fargo offered banking services, such as buying and selling paper banks drafts, which served as a representation of gold during a prime time in the economy. They would also extend a delivery service of customer’s valuables, branding their corporate symbol of a six-horse stagecoach. “From the Gold Rush to the early 20th Century, through prosperity, depression and war, Wells Fargo earned a reputation of trust due to its attention and loyalty to customers.” (“History of Wells Fargo”) With the help of the transcontinental railroad, Wells Fargo exploded across the nation throughout the years and still is considered one of the
This short report aims to give a brief overview of Deutsche Bank’s alarming situation and describe the sharp decrease of its profitability. It will briefly introduce the context of this crisis and aim to explain it through an analysis of one of the most used indicators of performance for banks, the return on equity (ROE).
While it is prudent to talk about the fallout from the scandal, it is similarly essential to make a stride back and assess what caused it in any case: how the organization's inside culture got to such a limit, and is it conceivable that Wells Fargo could have kept away from the embarrassment (Partnoy & Eisinger, 2013).
They said to the people who support Wells Fargo, “if you feel like you received an account that you didn’t want, come in and see us and we will make it right” (Peter Conti-Brown, “Why Wells Fargo Might Not Survive its Fake Accounts Scandal”). I believe that Wells should do more than just talk to their customers if they experienced one of the fake numbers. It seems like they were and still are taking about this scandal like it wasn’t a big deal, when the case is still relevant today. Like I briefly mentioned above, the most unethical behavior about this is the fact that not just a couple members were involved. There were a couple thousand employees involved who created new bank and credit card accounts for customers without their
Over the past 150 years, Wells Fargo Bank has become one of the largest financial institutions in the North America. Wells Fargo Bank is much more than a bank. It’s a premium financial service provider. It believes in its people and products to help them to succeed. So how has Wells Fargo become such a leader in the financial world? It measures its success by its management staff and team members. Wells Fargo has developed and implemented its own management structure and answers the following questions regarding existing success:
While Wells Fargo is doing very well and growing financially, it is important to keep in mind how the public sees them. It is necessary for them to keep obtaining new customers, and to continue to create an ethical culture among the employees. It is important for them to not slip back into their old routine, and not become too obsessed with opening new accounts. It is very appropriate that they are shifting their goals toward customer satisfaction in order to please existing and new customers. Overall, Wells Fargo has been fortunate, and has handled the scandal with
...he black in financial statements, they need to work on their strategic plans and controls. They need to deal with their mortgages more ethically and more responsibly. Instead of owning the ignorance of their own customers, they should be more communicative towards them. This will also save them a lot of money on lawsuits and attorney fees. My other opinion as well is that they need to continue in whatever they are doing to be innovative. As history has shown, they are innovative from the beginning. Since they have opened in the 19th century, Wells Fargo has been open to new ways to make business. For example, Wells Fargo has started with a simple mission as delivering new services such as the pony express to now with online banking and mobile deposits. In the next chapter of this capstone research paper, we will discuss recommendations for Wells Fargo stay on top.
The first analysis will be on Verizon. The current ratio and the debt to equity ratio both improved in 2006 when compared to 2005. However, the net profit margin dropped from 9.8% to 7.0%. What does this tell us as investors...
Ratios traditionally measure the most important factors such as liquidity, solvency and profitability, as well as other measures of solvency. Different studies have found various ratios to be the most efficient indicators of solvency. Studies of ratio analysis began in the 1930’s, with several studies of the concluding that firms with the potential to file bankruptcy all exhibited different ratios than those companies that were financially sound. Among the study’s findings were that the deciding factor of the predictor of bankruptcy should not be only a few ratios, as the measure of a company’s financial solvency may differ as the firm’s situations differ. The important question is to which ratios are to be used and of those ratios chosen, which ratios are given priority weight.