|
|
 |
| Homepage
> Stocks > |
An
Analysis of Wells Fargo |
Wells Fargo & Company (WFC) is a huge Western
and Midwestern bank that provides a diverse array of financial
services to its more than 23 million customers. The company employs
more than 150,000 people at its over 6,000 locations nationwide.
Wells Fargo has about $500 billion in assets.
While the
company continues to derive more than half its revenues from
interest income (about $26 billion), its activities are not limited
to collecting deposits and lending money. Wells Fargo engages in
other businesses such as brokerage services, asset management, and
investment banking. The company also makes venture capital
investments.
Over the last ten years, Wells Fargo has
averaged a 1.57% return on assets and an 18.19% return on equity.
Location
Wells Fargo is closely associated with California
in the minds of most investors. The company now operates in 23
different states. However, the concentration in California remains.
Mortgage lending in California accounts for approximately 14% of
Wells Fargo total loan portfolio. Commercial real estate loans in
California account for another 5% of the company total loans. No
other single state accounts for a similarly sized portion of total
loans. In fact, neither mortgage lending nor commercial real estate
lending in any other state accounts for more than 2% of Wells Fargo
total loans.
Cross-Selling
Wells Fargo focus on
cross-selling is well known. The company has a stated goal of
doubling the number of products the average consumer and business
customer has with Wells Fargo to eight products per customer (from
the current four products per customer).
Cross-selling
increases customer stickiness. It also helps increase profitability
by decreasing expenses relative to revenues. The need for a large
physical footprint is reduced ?as is the need for a large number of
bankers. Instead, the existing infrastructure is able to provide
additional revenue from the same customers.
Wells Fargo
Chairman & CEO, Richard Kovacevich, explains the importance of the
company cross-selling in the Vision & Values section of the
corporate website:
"Cross-selling ?or what we call
needs-based selling is our most important strategy. Why?
Because it is an increasing returns business model. Its like the
network effect of e-commerce. It multiplies opportunities
geometrically. The more you sell customers the more you know about
them. The more you know about them the easier it is to sell them
more products. The more products customers have with you the better
value they receive and the more loyal they are. The longer they stay
with you the more opportunities you have to meet even more of their
financial needs. The more you sell them the higher the profit
because the added cost of selling another product to an existing
customer is often only about ten percent of the cost of selling that
same product to a new customer. This gives us as an aggregator ?a
significant cost advantage over one product or one channel
companies. Cross-selling re-invents how financial services are
aggregated and sold to customers just like other aggregators
such as Wal-Mart (general merchandise), Home Depot (home improvement
products) and Staples (office supplies)."
|
|
|
|
