Why Wells Fargo ranks high in overall competitiveness

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SWOT analysis: Wells Fargo’s products and geography

Previously in this two-part series, we looked at Wells Fargo’s various services. In this article, we’ll look at its overall position vis-à-vis its competitors. This can best be done using a quick SWOT analysis of its product line—where we look at strengths, weaknesses, opportunities, and threats.

Wells Fargo- Market Leadership- Saul

 

Areas of product-line strength

Wells Fargo & Co (or Wells Fargo) (WFC) provides a complete suite of banking services. The chart above shows the bank’s areas of strength at the end of financial year 2013. It is strongest in mortgages, where it shows dominant leadership. In this area, Wells Fargo remains far ahead of its competitors, JP Morgan Chase & Co (JPM) and Bank of America Corporation (BAC). The bank also leads in auto lending since dethroning Ally from the top position in 2013. A third area of strength for Wells Fargo is private-student lending.

Areas of product-line weakness

Wells Fargo remains weak in investment banking when compared to its major peers. With the acquisition of Wachovia, the bank is trying to catch up. It needs to use its strength in commercial lending to build up its client base in this area.

Opportunities for Wells Fargo

Wealth management of ultra-high-net-worth individuals, families, institutions, and endowments represents a big opportunity for Wells Fargo. It’s off to a good start in this area, with subsidiary Abbot Downing capturing a decent market share to date.

Cards represent another big area of opportunity for Wells Fargo. Only 36% of its retail banking clients and 20% of its mortgage clients have Wells Fargo cards. In terms of income bracket, only about 7% of its affluent customers have cards—not good when compared to the nearly 30% industry benchmark.

Threats to Wells Fargo

The biggest threat to Wells Fargo comes from its exposure to the U.S. economy. Its geographical footprint is too limited outside this country. In contrast, Citibank, of Citigroup Inc (C), is largely risk-free because it’s strong in various locations outside the U.S.

This concludes the first of the Wells Fargo two-part series. In our next second part ((read here), we’ll provide more qualitative analysis—this time about the bank’s strategies.

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