ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO.

ANALYSIS

Organizational Analysis Paper - Wells Fargo & Co. Analysis

Business 596 Graduate Business Seminar Professor Marzwell

Wei Wang

ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. ANALYSIS Organizational Analysis Paper Wells Fargo & Co. Analysis Current Situation Wells Fargo Today Wells Fargo & Company (WFC) is a diversified financial institution that provides banking, insurance, investment banking, mortgage, and business finance. Wells Fargo has more than 9,000 stores and more than 12,000 ATMs across North America and internationally (wellsfargo.com, 2013). Wells Fargo & Company was founded in San Francisco during the gold – rush period. And now, Wells Fargo went in a new era of banking in 2008 after the acquisition of commercial banking giant Wachovia, which makes Wells Fargo the fourth largest bank in U.S. in terms of assets. Its main business lines are retail, commercial, and corporate banking services. And the branch of Wells Fargo provide services of brokerage and investment, wholesale banking, consumer finance, mortgage banking, leasing, agricultural finance, commercial finance, data processing, trust services, advisory, mortgage-backed securities, and venture capital investment. Among all of its 80 plus services, the largest business are wholesale banking, home and consumer finance, community banking, investments and insurance. History of Wells Fargo & Co. Wells Fargo bank has more than 150 years of history. The bank's early age date back to 1852, during the gold rush period, Henry Wells and William Fargo founded Wells, Fargo & Co (wellsfargo.com, 2013). The original bank offered banking services and secured delivery service of gold, notes, and other valuable assets. In the 1860s, Wells Fargo made its reputation of trustworthiness by operating the famous stagecoach line. It secures and

During the World War I. Wells Fargo reposition and rebuilt its whole business during the 20th century.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. government as part of its World War I plan. The following table shows Wells Fargo has a great reputation with its customer and the customer satisfaction is high (wellsfargo. third consecutive year)Global Finance Magazine Best Bank for Payments and Collections (N.S.S. Wells Fargo’s customers are over 50 million households. Top 20 Biggest Public Companies in World (2012) Forbes Most Powerful Women in Banking – Top Banking Teams (2012) 27th 45th Most Admired (World) (2012) Fortune 25th Revenue (U. and become a regional bank in California and operating in San Francisco as a banker’s bank for the region. 2013). 2013). And today. Wells Fargo expands its branches throughout the West. America) (2012) . In the 1990s. and it owns more than 9. There are more than 266. Midwest.000 people working for Wells Fargo and leading by CEO John Stumpf (Wells fargo & compnay. Wells Fargo had become a major bank in California and the seventh largest bank in the US.com.) (2012) Fortune Best Corp/Institutional Internet Bank (North America) (2012. By the 1980s. Customer satisfaction and reputation. and several Eastern states. After the war. Wells Fargo’s delivery system was hired by U. ANALYSIS delivers gold and other valuable assets through the Wild West and across the country.000 branches nationwide.

retail bank Bank Technology News . The following table shows the awards that Wells Fargo get in innovation area. in spite of that it is a more than 150 years old Corporation (wellsfargo. and the most recent innovation is to allow customer to manage their account and daily expense with their mobile phone. For example. such as Forbes. Top Innovator Mobile services (2012) CIO. many of the most influential business magazines. highlighted as Top 10 Innovator Annual ranking of best U. Wells Fargo is also a very innovative company in banking service. Innovation. Fortune. Wells Fargo was voted as top 10 innovators in mobile service by bank technology news. 500 Most Innovative Companies (2012) Information Week First place for responsiveness (2012.S.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. Jim Smith. especial when it comes to ethic of the corporation and customer services. Wells Fargo is dedicated to improve its convenience of its banking service for customer. 2013). Meanwhile. value highly about Wells Fargo. Barron’s. ANALYSIS American Banker 100 Best Corporate Citizens (2012) Corporate Responsibility Magazine Most Respected (World) (2012) Barron’s Global Finance Magazine Excellence in Middle Market International Banking Services (2012) Greenwich Associates As we can see.com. Moreover. and Global Finance Magazine.

product quality.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO.S. Keynote’s Mobile Banking Scoreboard) Most A grades . ANALYSIS sites) Keynote Competitive Research American Banker Best Corp/Institutional Mobile SolutionProvider in North America (2012) Global Finance Magazine Best Corp/Institutional Website Design in the World (2012) Global Finance Magazine Best Consumer Internet Bank in U. third consecutive year) Global Finance Magazine #1 in North America Social Media for Consumers (2012) Global Finance Magazine Digital Marketing Strategy of the Year (2012) Retail Banker International Best Privacy & Security and Best Quality & Availability (2012. of top five national banks (2012 Middle Market Quality Index) Phoenix-Hecht Most A grades for customer service and fraud prevention services (2012 Large Corporate Quality Index) Phoenix-Hecht “The Innovators” list for advances in mobile banking (2012) Bank Technology News . (2012.

The following figure shows the prime rate in recent years. Banks are also insured by FDIC and follow its regulations. . 2013). The prime rate is the interest rate that banks charge to their big corporation customer with highest credit and lowest risk of default (Jose.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. 1) Prime rate. ANALYSIS Keynote Competitive Research Analysis of Commercial Banking Industry Description of the industry The participant bank in commercial banking industry offers financial service. 2013). The supervisory agency regulating this industry is Office of the Comptroller of the Currency. Key external influencers Many economy factors could have strong impact on the performance of banks. using as the capital of funding the loans. And banks also accept deposits from customers. such as commercial and customer loans (Jose.

credit card loans. And high prime rate could help banks access to a higher margin. 2013). And it is positive relevant to household’s expectation of income. 2013). Low prime rate could increase the demand of loans. Aggregate household debt includes all outstanding commercial loans. 2) Aggregate household debt. Corporate profit is expected to increase in 2013 (Jose. The industry revenue increase when aggregate household debt in high level. but are expected to remain in low position in 2013 and 2014. mortgage. and student loans (Jose. As the figure shows prime rate change a lot during past years. The aggregate household debt is expected to gradually increase in 2013. Major competitors in commercial banking industry There is over 7. however.000 banks in US. the number of bank as large as Wells Fargo is not a lot (Jose. Commercial loans are a big part of banks’ revenue. 3) Corporate profit. ANALYSIS The bank’s revenue comes from the difference between prime rate and federal funds rate. And when corporation profit is high. car loans. 2013).ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. banks are more likely to earn high profit. The major players in commercial banking industry are JPMorgan Chase & .

and retail clients. As we can see. The largest revenue of Wells Fargo comes from its community banking service. ANALYSIS Co. And in 2010 and 2011 . Citigroup Inc.8% and is over 2% more than the second place – JPMorgan Chase. The following figure shows the competitive landscape of commercial banking industry and the market share of each major national bank. The following figure shows Wells Fargo’s financial performance in last many years (Jose. and it can generate more than 80% of revenue. In other words. Bank of America.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. As the figure shows Wells Fargo has the largest market share.. individual customer. But the pathway for Wells Fargo isn’t very clear and is full of obstacles. which is 12. and Wells Fargo itself.. Wells Fargo is slowly coming back from the loss in subprime mortgage crisis. Wells Fargo’s revenue mainly comes from small business customer. 2013).

The number one competitor of Wells Fargo is JPMorgan Chase. The revenue of retail financial service grows 16. It has about $2. The commercial banking service is the smallest segment among the top 3. asset management and corporate. card services and commercial banking. And the card service of Chase is one of the nation’s biggest credit card services generating over $125 billion in revenue annually. The most contributed segments of JPMorgan Chase are retail financial services. ANALYSIS Wells Fargo’s revenue actually decreases as a result of low increase in housing market as well as in mortgage market. card services.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. commercial banking. and now the largest bank in United States. treasury and security services. The service face to variance of clients. however. Bank of America. JPMorgan Chase. government agencies. retail financial services. It has approximately 10% of market share in US. JPMorgan has total seven business segments: investment banking. Bank of America (BoA) is the third largest bank in US judged by the size . its quality is probably the best. and non – profit organizations.2 trillion in assets.2% last year. JPMorgan is one of the largest financial institution in the world. including corporations.

From 2009 to 2012. 2013). The model assesses the industry or company’s strangeness toward these five forces to analysis the . In Porter’s theory.9 billion. $10. respectively. Bank of America’s net income shows how badly the mortgage crisis affected its performance.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO.3 billion net income. Porter's 1980 paper "Competitive Strategy: Techniques for Analyzing Industries and Competitors. Bank of America is projected to lose market share and keep downsizing the following five years. ANALYSIS of revenue (Jose." Since then. And Bank of America fell to the third place of commercial banking behind JPMorgan Chase and Wells Fargo. The following figure shows the profitability of Bank of America. $16.8 billion and $5. Bank of America estimated loses $6.9 billion. Moreover. Bank of America experienced a really bad hurt from the subprime mortgage crisis (Jose. As a result. it has become a frequently used tool for analyzing a company's industry structure and its corporate strategy. Porter’s Five Forces Analysis Porter’s five forces model originated from Michael E. Bank of America received $45 billion government loan under TARP in 2009. 2013). there are five competitive forces suited for every single industry and market. However.

Moreover. The following figure shows all the barriers for entering . regulation and inspection of Federal Reserve System. it must be approved by the Board of Governors of the Federal Reserve System and obey the supervision. the Federal Deposit Insurance Corporation (FDIC). 2013). and other federal regulatory agencies. in acquisitions of other banks and in interstate banking activities. The following figure shows the framework of Porter’s five forces model. Barrier to entrance – medium In United States. ANALYSIS company or industry’s situation (Industry Handbook. And commercial banking industry is highly regulated. the Office of the Comptroller of the Currency. Banks are restricted in their range of activities. to found a bank. banks also have requirement from FDIC of its capital level and reserve requirements.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO.

2013). because merger and acquisitions in the financial industry produces larger. technology. On the other hand. the competition is based on customer service. ANALYSIS commercial banking industry and its respective level of barrier (Jose. locations of ATMs). the competition of retail deposit is also expected to be enlarged. innovation. better capitalized and more geographically expanded banks.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. In fact. However. quality and variety of products and services. Other factors. also can affect the competition in commercial banking industry. And economy of scale brought by mergers could give bank giants the ability to offer large variety of financial products and service at more competitive prices. interest rates on loans and deposits. In the near future. such as transaction time. The reason is that banks . reputation and price. the intense competition is most likely to carry on. in the banking industry.g. Although the number of commercial banks goes down rapidly while the number of ATMs goes up dramatically. even heat up. the growth of number of banking offices continues and that shows customers needs more bank branches for their convenience. lending limits and customer convenience (e. both Goldman Sachs and Morgan Stanley converted from investment bank status into bank holding companies to increase their access to retail deposits Competitive Rivalry within the industry – high The rivalry within the industry is rated high. In 2008. some financial companies still manage to entry the commercial banking industry.

and more prioritize on retail deposits (Jose. the deposit in US has been decrease and the money flows to stock market through investment banks and security brokers. hedge funds. Threat of substitute – Medium Banking belongs to wealth management industry (Financial services meet. And ultimately. Statistic shows that nowadays. the money flows to business in every industry. What are they? For example. ANALYSIS try to less dependent on wholesale market for funding.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. insurance company handles a lot of wealth management in US. And a point of view is that the substitute of bank is other kind of wealth management firms. Bargaining power of suppliers – high The supplier of commercial banking includes Mutual fund companies. So the substitute of commercial banking is rated as medium. other . 2013). 2011). And investment bank handles wealth management as well.

ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. . So the bank has to try its best to sustain its customers. buyer can switch between banks very conveniently and at extremely low cost. 2011). The bargaining power of buyer is high. customers will walk in competitor ’s door with their money. for instance. ANALYSIS broker dealers in structured deals. 2013). Bargaining power of buyers – high The bargaining power of buyer has been rising dramatically in recent (Jose. But now the industry shifts toward the favor of buyers. The industry used to have all information and buyers have no power to it. otherwise. life insurance companies and companies looking to go public (Financial services meet. Because of the technology evolution. separate account managers. The bargaining power of suppliers has been increasing in the past two decades. The following figure shows number of investment grade corporation (big portion of bank’s customer) falling. suppliers now has to be paid up to 300% of their trailing 12 months productions and commission and benefit fee.

.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. ANALYSIS Vision and Value of Wells Fargo Vision According to Wells Fargo’s website. the vision perfectly describes Wells Fargo’s spirit. Wells Fargo has a strong believe in its vision since the very first day when the vision is created 20 years ago." 2013). With only 88 characters. And Wells Fargo thinks their vision is even more relevant today than 20 years ago. its vision is “We want to satisfy all our customers’ financial needs and help them succeed financially” ("Vision and value.

Wells Fargo’s job is to let customer bring more work to them and satisfy their needs. If customer brings their financial service to trusted bank and the employees know them well and provide warm – hearted and precise guide and advice. Moreover. Because everyone understands of financial success differs.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. and the desire to be financial literate. Customers’ financial success probably includes the intention of financial security. retirement life. and able to satisfied with their financial needs with all banks variety of products and services. and share a lot of things. The vision of Wells Fargo does not involve getting bigger. Wells Fargo believes that their concentration of satisfying customer is the reason they work hard and could lead to their profitability. Wells Fargo requests its employees working hard. It also could include the intention to restrict to spending and saving plan and be disciplined. it still needs to learn. Value . or investment of business. Wells Fargo’s job to help variances from different customers and can be according to personal needs." 2013). so they can afford their home. persistence and determination. ANALYSIS Wells Fargo’s vision of financial satisfied. and selling more products. teach. pursuing expansion of transaction. Although Wells Fargo makes steady progress toward its vision to satisfy all customers’ financial needs and help them succeed financially. Understand each customer’s financial pursuant is important and the first step for fulfilling and satisfying them. successful customers is based on a simple premise that believe customer in all business can be served better and save money and time. In order to fulfill its customer – centric vision. This is exactly what Wells Fargo pursued ("Vision and value. it’s all about building relationship with customers one at a time. education.

And the values should be implemented to all team members and sculpture to every team member ’s soul. Strengths  Strong domestic market position  Cross selling  Strong capital Weaknesses  Unfavorable shift in earning assets and yields  Weak international market position  Expense management Opportunities  Increase in Wealth Management industry  Immigrant customers  Online customers Threats  Losses from Wachovia acquisition  Regulatory challenges  Uncertain economy in US . every conversation. and every interaction with employees and customers. so that values on paper could worn out. but value in spirit never die.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. The five primary values of Wells Fargo are: “People as a competitive advantage” “Ethics” “What’s right for customers” “Diversity and inclusion” “Leadership” SWOT Analysis of Wells Fargo & Co. ANALYSIS The value is the guide to every transaction. the value should be embedded into every Wells Fargo’s product and every service. Also. every decision.

Weaknesses Unfavorable shift in earning assets and yields. from 51% for 2008. Wells Fargo has strong market share in US banking industry (Wells Fargo & Company SWOT Analysis. strong market position could leads to significant economy of scale for Wells Fargo. Strong capital base. 2012).33% in the time period from 2009 to 2011. Therefore. So it is expected to remain strong capital base. For example. one fourths of its customer has eight or more product and forty percent of customer has six or more products. Wells Fargo is the largest producer and consumer of cross – selling for financial products (Wells Fargo & Company SWOT Analysis.8 billion in the year of 2009 to near $114 billion in year of 2011. As a result. Wells Fargo has less risk of capital loss than its competitors. At the same time. Its tier 1 capital increases from $93. and small business segment. 2012). ANALYSIS Strengths Strong market position in US. tier 1 capital ratio increases from 9. It is Wells Fargo’s goal for its customer to carry eight products. used car lender. 2012). Cross selling could bring higher return on investment and cost leadership over other competitors. Capital could use to cushion against market uncertainty. It is the fourth largest bank in size of assets in US. Wells Fargo’s earning assets has slightly shifted from loan to more liquid assets during 2010 (Wells Fargo & Company SWOT Analysis. average interest-bearing core deposits increased to 58. Due to weak loan demand. Cross selling. the . Consequently. The company’s capital reserve has been increasing in last few quarters. for instance the mortgage segment.6% of average earning assets for 2011. It also is leader many financial service segments.25% to 11.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO.

which measure bank’s expense management. Wells Fargo is one of the nation's top-seven retirement record keepers. The US assets add up to its almost 100% of total assets. And domestically. Wells Fargo is one of the early adopter of online banking. The company provides private banking.83% in 2008.000 financial advisors managing $2 trillion in client assets through bank. As a result. its business focus on the Midwest and Southeast. Opportunities Wealth management. 2012). private client and independent channels. Wells Fargo is weak for international expansion. It also makes Wells Fargo weak against probable US economy downturn.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. It also one of the nation's largest retirement administrators and a leading distributor of IRA and annuity products. trust and family office services to affluent investors. The efficiency ratio. Post Wachovia merger Wells Fargo has 15. It means that noninterest expense raise in terms of total revenue. Wells Fargo is not spread very wide geographically. And the bank is continuously working on its online service and mobile service’s customer interface to make it more beautiful. Online banking service could dramatically simplify the company’s ability to gain customer without increasing much of marketing cost. ANALYSIS company's net interest margin (NIM) declined to 3. is rising in last few years. the company’s margin decreases. Thus.89% in 2011 from 4. The company's focus on wealth management is likely to yield favorable results both in the near and long terms (Wells Fargo & Company SWOT Analysis. Weak international market share. the bank’s contribution margin could . Weak expense management. Online banking. from those just beginning to accumulate wealth to those who have many financial services needs.

ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. Uncertain economy. Increasing regulatory challenges not only increase non – compliance risk. However. homeowners are expecting home price to boost in one year. and 0. 2012. Threats Losses from Wachovia acquisition. but also increases compliance spending. As a result. Slow job market recovery and weak consumer spending are big concern to not only consumers. Losses from Wachovia acquisition could continue to affect the company's financial position and performance in the near term (Wells Fargo & Company SWOT Analysis. Increasing regulatory challenge. It is reasonable to believe that the total cost to Wells Fargo from mortgage securities is still hard to quantify.2% in May. ANALYSIS be increasing because of online banking. it is still affecting Wells Fargo’s near financial performance. 2012). whether the confidence in housing market could offset the weakness in job market and consumer spending determines the future of US economy. but also organizational investors (Wells Fargo & Company SWOT Analysis. Although the acquisition of Wachovia could help Wells Fargo get access to a few profitable market. Personal Assessment Strengths SWOT Analysis Weaknesses .5 percent in June. 2012). US economic growth prospects are increasingly looking uncertain. consumer spending falls by 0. and bullish housing market. In fact.

Good education. since I am international student for many years. and there are a lot of difference between Chinese financial industry and US banks. Opportunities . English is not mother tongue. However. I could understand their financial needs better. perusing master degree in US teaches me sufficient language skills. And Wells Fargo has a big part of customer are immigration. Weaknesses Lack of understanding of US market. I am highly educated with master degree in finance education.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. Since I was born and raised in China. ANALYSIS  Strong international background  Good education Opportunities  Economy recovery  Strong Chinese group in California  Lack of understanding of US market  English is not mother tongue Threats  Regulatory challenges Strengths Strong international background. I can offer Wells Fargo my experience with international customers. because it is a little less connected with people when using language other than mother tongue. I am a little less familiar with US bank. So I am capable of doing finance services. It could be a big disadvantage when compare to native speakers.

There are many limitations for international student to find job. So it is always a shortcut to find a job in Chinese firms. There are a lot of Chinese in California. from the year of 2012. . For example. it is illegal to work outside campus while studying. ANALYSIS Economy recovery. Many signals show the economy is recovery and as well as the job market. Financial Analysis The following table is the highlights of Wells Fargo & Co. Strong Chinese group in California. and a lot of Chinese owned firms as well.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. Threats Regulatory challenges. especially in Los Angeles area.

all financial situations. Wells Fargo has a very healthy over . Earning Analysis The following tables indicate Wells Fargo’s ability of earning. .ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. ANALYSIS As we can see.

ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. ANALYSIS Balance Sheet Analysis The following table shows Wells Fargo’s balance sheet information at the year end of 2012. .

ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. ANALYSIS .

ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. ANALYSIS .

ulv. 1-8.com/invest_relations/vision_values Wells Fargo & Company SWOT Analysis. Retrieved from http://consultingwithresults.wellsfargo. Retrieved from http://www.com/2011/08/03/financial-services-meet-porters-fiv e-forces/ Industry Handbook: Porter's 5 Forces Analysis. (2012).aspx?entid=1288 Vision and value.ORGANIZATIONAL ANAYSIS PAPER – WELLS FARGO & CO. (2013). (2013).com. E.investopedia.asp Jose. Retrieved from http://0-clients1. (2013).com/downloads/pdf/about/wellsfargotoday. Retrieved from https://www.wellsfargo.leopac. (2011). Wells fargo & compnay.wordpress.com/wps/portal/usa/companies/company-profile/Wells-Fargo-&-Compan y?companyId=1161 WellsFargo. (2013). Ibisworld industry report 52211 commercial banking in the us. (2013).com/features/industryhandbook/porter.ibisworld.vault. Retrieved from https://www.com.edu/reports/us/ industry/default.pdf . Wells Fargo & Company SWOT Analysis. Retrieved from http://www. ANALYSIS Reference Financial services meet porter’s five forces.

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