What Sets Wells Fargo Apart?



What sets Wells Fargo apart from peers

Wells Fargo (WFC) is the largest mortgage lender in the United States. The company operates primarily in retail and commercial banking. Unlike its peers, Wells Fargo has little exposure to trading and investment banking operations. Its income is primarily derived from the traditional loan-making business. It is also Warren Buffet’s (BRK.A) largest holding. In the past ten years, Wells Fargo’s book value has been twice that of JPMorgan Chase (JPM) and ten times that of Bank of America (BAC). It has been one of the most profitable banks (XLF) in America, generating a 1.3% return on assets in 2015.

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Focus on traditional banking

The company focuses primarily on traditional banking operations, such as providing loans and generating deposits. Its relatively simple operating model makes it less risky than peers JPMorgan Chase (JPM), Goldman Sachs (GS), and Citigroup (C), which engage in complex activities such as trading and investment banking.

US-focused operations

The bank’s operations and investments are more US-focused than those of its large-cap peers. Consequently, it is at far less risk of being impacted by global events than peers. In 4Q15, its non-US exposure accounted for 4.4% of its total assets. In comparison, for Citigroup, JPMorgan Chase, and Bank of America, this ratio stood at 52.3%, 11.4%, and 10.9%, respectively.

Most profitable among peers

The bank has been the most profitable among peers, posting returns of 10% on shareholder equity and 1.3% on assets in 2015. Meanwhile, JPMorgan Chase and Bank of America generated returns on assets of 0.99% and 0.74%.

It is the third-largest bank in the United States and the second largest in terms of deposits, home mortgage servicing, and debit cards. Its main competitors in the United States are JPMorgan Chase (JPM), Bank of America (BAC), and Citigroup (C).


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