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Wells Fargo’s Wholesale Banking Segment Suffers

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Oct. 23 2015, Updated 2:06 p.m. ET

Analysis of the Wholesale Banking segment

In this section, we’ll analyze the performance of Wells Fargo’s (WFC) Wholesale Banking segment. The segment provides financial services to businesses around the globe. It operates under the following subsegments:

  • Middle Market Commercial Banking
  • Government and Institutional Banking
  • Corporate Banking
  • Commercial Real Estate
  • Treasury Management
  • Commercial Mortgage Servicing
  • Wells Fargo Capital Finance
  • Wells Fargo Securities

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Segmental earnings

3Q15 revenues for the Wholesale Banking segment fell 2% to $5.6 billion compared to the same period last year. This was due to lower non-interest income. Non-interest income was lower by 6% due to lower gains on equity investments, lower mortgage banking, and commercial real estate brokerage fees.

Net income for the segment was down 8% compared to 3Q14, while non-interest expenses were higher by 1% due to higher staff costs. Provisions for credit losses increased by $130 million compared to last year.

Operational metrics

Loans in the Wholesale Banking segment increased 15% compared to 3Q14, while treasury management revenue increased 9%. Wells Fargo has the highest weight of 8.7% in the Financial Select Sector SPDR ETF (XLF) and the Vanguard Financials ETF (VFH).

Competitors such as Bank of America (BAC), Citigroup (C), J.P. Morgan (JPM), and Goldman Sachs (GS) have weights of 5.8, 0.35%, 8.1%, and 2.8%, respectively.

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