Wells Fargo
Wells Fargo is a US headquartered multi-national financial services company. Its primary business is Wells Fargo Bank - the fourth largest bank in the United States by total assets with over 8,000 branches across the country.
Employees: 268,531
Revenue: $82.859B for FY2022
HQ Location: San Francisco, California and operational HQ in Manhattan, New York
What they do:
Provide a range of financial products to consumers, private and large public companies.
Banking and Insurance, to Investment and Asset Management products.
Their vision and priorities:
A year of recovery, rebound, and outlook for 2023
The company expects a recession in the first half of 2023, recovery around midyear, and a rebound that gains strength into year-end. The main key drivers for 2023 are inflation, interest rates, and corporate earnings. Once investors begin to anticipate economic and earnings recovery after the first half of 2023 the S&P 500 Index is forecasted to gain into year-end and hopefully multiple policy interest-rate reductions after rates reach a peak above 4.50% early in 2023.
Things to know right now
New products launched in 2022
These include Flex Loan, new credit cards, and a new digital banking platform for commercial clients.
A Flex loan is an open line of credit that's unsecured. After approval, the client can use their flex loan account to withdraw funds up to their approved credit limit at any time. They're similar to a personal line of credit except the customer’s rate and borrowing limit isn't dependent on their credit score.
The Wells Fargo Autograph℠ Card is a credit card that lets a customer earn up to 3X points per dollar and has no annual fee.
The digital banking platform is called Vantage, which replaces the bank's Commercial Electronic Office Portal, or CEO Portal, which it launched over two decades ago to serve its commercial banking and corporate and investment banking clients
Helped millions of customers avoid overdraft fees in 2022 by eliminating non-sufficient funds fees and transfer fees for their customers enrolled in overdraft protection. They also offered early payday making eligible direct deposits available up to two days early, as well as offering an extra-day grace, giving their eligible customers an extra business day to make deposits to avoid overdraft fees. Overdraft fees only disappear for customers who participate in their overdraft protection program.
The bank announced its retrenching from the U.S. mortgage market.
It plans to continue providing mortgages for existing customers and homebuyers in minority communities but the bank is going to close its third-party mortgage-buying business in which it would purchase mortgages originated by other lenders. The bank is also planning to sell the bulk of its mortgage-servicing business.
$2.8 billion after-tax operating loss tied to legal and regulatory costs - their Wikipedia page shows a number of lawsuits, fines, and controversies if you are looking for a good read!
“We continue to prioritize building an appropriate risk and control infrastructure and I am optimistic about our future as we continue to advance our efficiency initiatives, invest to better serve our customers, and grow our business.”
What does each business unit do?
Personal
Providing checking and savings accounts, credit cards and loans to consumers
Investing and Wealth Management
Self-serve and assisted investment products and services for consumers and high net worth individuals.
Small Business
Providing checking and savings accounts, credit cards, loans, merchant services (point of sale), and payroll services to small companies.
Commercial Banking
Banking services for private, family owned and certain public companies, including bank services and commercial financing and treasury management.
Corporate & Investment Banking
Broad industry expertise and services for large organisations. Access to institutional finance, foreign exchange, commercial real estate and global services.
Their financial calendar
Q1: January-March - Earnings 14th April 2023
Q2: April-June - Earnings 18th July 2023
Q3: July-September - Earnings 13th October 2023
Q4: September-December - Earnings 17th January 2024
Next Earnings Report:
Around 14th April 2023
Positives from the last earnings report:
Net interest income increased by 45%, primarily due to the impact of higher interest rates, higher loan balances, and lower mortgage-backed securities premium amortization.
Consumer Banking Lendings’ revenue increased by 8% due to :
An increase in Consumer and Small Business Banking
Credit Card is up 6% which was driven by higher loan balances, including the impact of a higher point of sale volume and new product launches
Personal Lending was up 9% on higher loan balances, partially offset by loan spread compression
Commercial Bankings revenue is up by 38%
primarily due to the impact of higher interest rates and higher loan balances
Commercial Banking noninterest expenses increased by 9% primarily due to higher personnel expenses and operating losses
Corporate and Investment Banking revenue increased by 18%
Driven by stronger treasury management results reflecting the impact of higher interest rates and improved lending results on higher loan balances,
Commercial Real Estate was up 16% reflecting higher loan balances and the impact of higher interest rates
Markets were up 17% due to higher trading revenue in equities, rates and commodities, foreign exchange, and municipal products
Wealth and Investment Management revenue increased 1%
Due to the impact of higher interest rates
Challenges from the last earnings report:
They have faced pressure as sales and refinancing activity has fallen steeply amid mortgage rates that have topped 6%. The bank said its home lending revenue was down 57% this quarter ($353 million of severance expenses primarily in Home Lending)
$3.3 billion of operating losses primarily related to a variety of previously disclosed historical matters, including litigation, regulatory, and customer remediation matters
Credit losses have continued to increase slowly but credit quality remained strong, and they continue to make progress on their efficiency initiatives.
Company-wide noninterest income decreased by 46%, driven by lower results in their affiliated venture capital and private equity businesses.
Consumer banking and lendings noninterest expenses increased 16% reflecting higher operating losses, severance expenses, and operating costs.
Commercial banking’s noninterest expense increased by 9% primarily due to higher personnel expenses and operating losses.
Corporate and Investment banking’s noninterest expense increased by 4% driven by higher operating costs and salaries expenses.
Wealth and Investment Management noninterest income was down 14% on lower asset-based fees driven by a decrease in market valuations
Corporate revenue decreased by $3.4 billion
Due to the impact of higher interest rate
Noninterest expense increased due to higher operating losses