Wells Fargo Corporation - 2009

Case Notes Prepared by: Dr. Mernoush Banton Case uthors: Donald !. Croo"s# $obert %. &ood'an# (ohn Burbridge

A.

Case Abstract

Wells Fargo Corporation )***.WellsFargo.+o', is a +o'prehensi-e strategi+ 'anage'ent +ase that in+ludes the +o'pany.s Calendar year-end De+e'ber /0# 2001 2inan+ial state'ents# +o'petitor in2or'ation and 'ore. 3he +ase ti'e setting is the year 2009. %u22i+ient internal and e4ternal data are pro-ided to enable students to e-aluate +urrent strategies and re+o''end a three-year strategi+ plan 2or the +o'pany. 5ead6uartered in %an Fran+is+o# Cali2ornia# Wells Fargo Corporation is traded on the Ne* 7or" %to+" 84+hange under ti+"er sy'bol WFC.

B.

Vision Statement ) +tual,

9ur produ+t: %8$:;C8. 9ur :alue-added: F;N NC; ! D:;C8. 9ur +o'petiti-e ad-antage: 9<$ P89P!8.=

C.

Mission Statement )Proposed,

>no*n by 9ur 9*n 3ea' Me'bers. ?We.ll be "no*n as a +o'pany that belie-es in people as a +o'petiti-e ad-antage# a great pla+e to *or"# an e'ployer o2 +hoi+e# a +o'pany that really +ares about people# "no*s the -alue that a di-erse *or" 2or+e +an bring# that en+ourages inno-ation: ne* and better *ays o2 ser-ing +usto'ers.= )@# 9, >no*n by 9ur Custo'ers. ?We *ant to be "no*n by our +usto'ers as a 2inan+ial partner# 2or outstanding ser-i+e and sound 2inan+ial ad-i+e# satis2ying all o2 their 2inan+ial needs and helping the' to su++eed 2inan+ially. 9ur +usto'ers# e4ternal and internal# are our 2riends. 3hey.re the +enter o2 e-erything *e do.= )0# 2, >no*n by 9ur Co''unities. ?We.ll be regarded as the pre'ier 2inan+ial ser-i+es +o'pany in ea+h o2 our 'ar"ets. We.ll pro'ote the e+ono'i+ ad-an+e'ent o2 e-eryone in our +o''unities in+luding those not yet able to be e+ono'i+ally sel2-su22i+ient# *ho ha-e yet to share 2ully in the prosperity o2 our e4traordinary +ountry. We.ll be "no*n as an a+ti-e +o''unity leader in e+ono'i+ de-elop'ent# in ser-i+es that pro'ote e+ono'i+ sel2-su22i+ien+y# edu+ation# so+ial ser-i+es and the arts.= )/# A# B# 1, >no*n by 9ur %hareholders. ?We.ll be "no*n as a great in-est'ent. We.ll ha-e 2inan+ial results# not only a'ong the -ery best in the 2inan+ial ser-i+es industry# but a'ong the entire Fortune C00. 3oday# *e.re the only
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ban" in the <nited %tates *ith a Moody.s +redit rating o2 ? aa= Ethe highest possible ratingF. )C, 0. 2. /. @. C. A. B. 1. 9. Custo'er Produ+ts or ser-i+es Mar"ets 3e+hnology Con+ern 2or sur-i-al# pro2itability# gro*th Philosophy %el2-+on+ept Con+ern 2or publi+ i'age Con+ern 2or e'ployees

D.

External Audit

CPM Competitive Profile Matrix

Critical Success actors Mar"et %hare Finan+ial Position %er-i+e Guality Produ+t Di-ersity Consu'er !oyalty 8'ployees &lobal 84pansion 8-+o''er+e 'otal

Wei!%t 0.0C 0.20 0.0C 0.00 0.0C 0.0B 0.00 0.01 (.))

Wells ar!o Wei!%ted &atin! Score 2 @ / 2 / 2 / 2 0./0 0.0C 0./0 0.20 0.@C 0.00 0.@0 0.00 *.))

Ban" of America Wei!%ted &atin! Score @ 2 2 @ @ @ 2 / 0.A0 0.A0 0.@0 0./0 0.A0 0.20 0.@0 0.0C +.*,

Citi #roup Wei!%ted &atin! Score / / @ / 2 / @ @ 0.@C 0.@C 0.@0 0./0 0.@C 0.00 0.00 0.0C *.-)

$S Bancorp Wei!% &atin! d Scor 0 0 0 0 0 0 0 0

0.@C

0.@C

0.@0

0./0

0.@C

0.00

0.00

0.0C

*.-)

.pportunities 0. %tronger 0st hal2 2009 2inan+ial position +ould lead to 2urther e4pansion and a+6uisitions 2. 84pansion in international 'ar"ets /. &ro* se+urities and in-esting se+tor o2 the business as a result o2 Wa+ho-ia a+6uisition @. 8nhan+e Wells Fargo brand on 8ast Coast and globally C. Consensus a'ong e+ono'ists +on+erning late 2009 and 2000 re+o-ery A. ;n+rease in use o2 te+hnology and ;nternet 2or online ban"ing

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'%reats 0. ;n+rease regulations 2ro' regulatory agen+ies in 2inan+ial ser-i+es 2. 8'erging legislature 'ay +onstrain 2reedo' in 2inan+ial ser-i+es 'ar"etpla+e /. 3rau'a +aused by 2inan+ial ser-i+es +risis inhibits in-est'ent in that se+tor @. &ro*ing dis+ontent o2 role o2 Federal $eser-e +ould result in 2urther 'ar"et tur'oil C. ;n+rease in une'ploy'ent rate +auses 'any to de2ault on loans and +redit +ard debt External actor Evaluation /E E0 Matrix 1e2 External actors .pportunities 0. %tronger 0st hal2 2009 2inan+ial position +ould lead to 2urther e4pansion and a+6uisitions 2. 84pansion in international 'ar"ets /. &ro* se+urities and in-esting se+tor o2 the business as a result o2 Wa+ho-ia a+6uisition @. 8nhan+e Wells Fargo brand on 8ast Coast and globally C. Consensus a'ong e+ono'ists +on+erning late 2009 and 2000 re+o-ery A. ;n+rease in use o2 te+hnology and ;nternet 2or online ban"ing '%reats 0. ;n+rease regulations 2ro' regulatory agen+ies in 2inan+ial ser-i+es 2. 8'erging legislature 'ay +onstrain 2reedo' in 2inan+ial ser-i+es 'ar"etpla+e /. 3rau'a +aused by 2inan+ial ser-i+es +risis inhibits in-est'ent in that se+tor @. &ro*ing dis+ontent o2 role o2 Federal $eser-e +ould result in 2urther 'ar"et tur'oil 0.0 0.09 0.01 0.09 2 0 2 0 0.2 0.09 0.0A 0.09 Wei!%t &atin! Wei!%ted Score 0./ 0.2B 0./A 0.20 0.2B 0./

0.0 0.09 0.09 0.0B 0.09 0.0

/ / @ / / /

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C. ;n+rease in une'ploy'ent rate +auses 'any to de2ault on loans and +redit +ard debt 'otal

0.0 (.))

0.0 *.+,

Positionin! Map
Nu'ber o2 Bran+hes )5igh,

Wells Fargo

Ban" o2 'eri+a
Citi &roup
Narro* Produ+t !ine 922ering

<% Ban+orp

Wide Produ+t !ine 922ering

Nu'ber o2 Bran+hes )!o*,

E.
0. 2. /. @. C. A. B.

3nternal Audit
Stren!t%s %trong <nited %tates 'ar"et position in retail ban"ing a2ter Wa+ho-ia a+6uisition Wells Fargo is a re+ogniHed brand *ith AB00 ban" bran+hes in the <.%. Well regarded and stable 'anage'ent tea' rti+ulated -ision and 'ission state'ents ;'pro-ing earnings and sto+" pri+e %trong te+hnology in2rastru+ture ;n (uly 2009# announ+ed a signi2i+ant e4pansion o2 the se+urity business unit

Copyright D 2000 Pearson 8du+ation# ;n+. publishing as Prenti+e 5all.

0. 2. /. @. C. A. B. 1.

Wea"nesses de6uate reser-es still being 6uestioned !a+"s international presen+e against 'aIor global ban"s Wa+ho-ia brand is still present in 'any 'ar"ets Negati-e @th 6uarter earnings in 2001 %till assi'ilating Wa+ho-ia +ulture and in2rastru+ture Co''er+ial and residential 'ortgage loan port2olios inherited 2ro' Wa+ho-ia Wells Fargo %e+urity is ne* in o22ering 'erger ad-i+e# sto+" and bond under*riting# loan syndi+ation and 2i4ed-in+o'e trading Negati-e 6ui+" ratio by appro4i'ately J1@/ billion at year end 2001

inancial &atio Anal2sis )De+e'ber 2009,

#ro4t% &ates 5 Wells ar!o 3ndustr2 S6P ,))

%ales )Gtr -s year ago 6tr, Net ;n+o'e )73D -s 73D, Net ;n+o'e )Gtr -s year ago 6tr, %ales )C-7ear nnual -g., Net ;n+o'e )C-7ear nnual -g., Di-idends )C-7ear nnual -g.,
Price &atios

C9.20 @0.00 A0.00 02.@@ -0B.C0 00.A/

Wells ar!o

@.00 -@.A0 0C1.20 00.B1 -1./B A.02

3ndustr2

-@.10 -A.00 2A.10 02.99 02.A9 00.1/

S6P ,))

Current PK8 $atio PK8 $atio C-7ear 5igh PK8 $atio C-7ear !o* Pri+eK%ales $atio Pri+eKBoo" :alue Pri+eKCash Flo* $atio
Profit Mar!ins 5

/0.B @/.0 9.0 0.A1 0./9 0A.@0

Wells ar!o

22.B 2@./ /.0 2.02 0.2@ 0A.@0

3ndustr2

2A.B A1.0 9.9 2.2C /.@1 0/.B0

S6P ,))

&ross Margin Pre-3a4 Margin Net Pro2it Margin C7r &ross Margin )C-7ear -g., C7r Pre3a4 Margin )C-7ear -g., C7r Net Pro2it Margin )C-7ear -g.,

N 02./ 9.2 N 2B.B 01.1

0.0 A.1 A.C 0.0 2C.9 09.0

/1.9 00./ B.0 /1.A 0A.A 00.C

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inancial Condition

Wells ar!o

3ndustr2

S6P ,))

DebtK86uity $atio Current $atio Gui+" $atio ;nterest Co-erage !e-erage $atio Boo" :alueK%hare
dapted 2ro' ***.'oney+entral.'sn.+o'

2.00 N N N 00.0 2A.00

2.C1 N N 0.0 0/.A 2B.A/

0.09 0.C 0./ 2/.B /.@ 20.A/

8et Profit Mar!in /50

Av! P7E

Price7 Sales

Price7 Boo"

02K01 02K0B 02K0A 02K0C 02K0@ 02K0/ 02K02 02K00 02K00 02K01

@2.00 0@.A0 0/.10 0/.C0 0@./0 0/.10 0@.B0 2/.@0 01./0 @2.00
Debt7 E9uit2

0.9@ 0.90 2.C/ 2.AC /.0@ /.0@ 2.BA 2.B0 /.@B 0.9@
&eturn on E9uit2 /50

0.2A 2.09 2.A2 2.C9 2.B1 2.90 2.A0 2.B0 /.A0 0.2A
&eturn on Assets /50

A.1 22.9 2A.0 29.C //.C /0.9 /0.9 01.0 20.@ A.1
3nterest Covera!e

Boo" Value7 S%are

02K01 02K0B 02K0A 02K0C 02K0@ 02K0/ 02K02 02K00 02K00 02K01

J2/.@/ J0@.@C J0/.CB J02.02 J00.0B J00.0C J1.99 J1.0/ JB.B2 J2/.@/

/.B9 /.0B 2.0B 2.CC 2.C2 2.CA 2.BA 2.10 2./@ /.B9

2.B 0A.9 01.@ 01.9 01.C 01.0 01.1 02.C 0C.2 2.B

0.2 0.@ 0.B 0.A 0.A 0.A 0.A 0.0 0.C 0.2

0./ 0.1 2.0 2.C /.1 /.1 /.2 0.1 0.1 0./

dapted 2ro' ***.'oney+entral.'sn.+o'

3nternal actor Evaluation /3 E0 Matrix

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1e2 3nternal actors Stren!t%s %trong <nited %tates 'ar"et position in retail ban"ing a2ter Wa+ho-ia a+6uisition 2. Wells Fargo is a re+ogniHed brand *ith AB00 ban" bran+hes in the <.%. /. Well regarded and stable 'anage'ent tea' @. rti+ulated -ision and 'ission state'ents
0. C. A. B.

Wei!%t

&atin!

Wei!%ted Score

0.01 0.0B 0.0A 0.0/ 0.01 0.01 0.09

@ / / / @ @ /

0./2 0.20 0.01 0.09 0./2 0./2 0.2B

;'pro-ing earnings and sto+" pri+e %trong te+hnology in2rastru+ture

;n (uly 2009# announ+ed a signi2i+ant e4pansion o2 the se+urity business unit Wea"nesses
0. 2.

de6uate reser-es still being 6uestioned

0.01 0.0B 0.0A 0.01 0.0A 0.0C 0.0@

0 2 2 0 2 0 0

0.01 0.0@ 0.02 0.01 0.02 0.0C 0.0@

!a+"s international presen+e o2 'aIor global ban"s /. Wa+ho-ia brand is still present in 'any 'ar"ets @. Negati-e @th 6uarter earnings in 2001 %till assi'ilating Wa+ho-ia +ulture and in2rastru+ture A. Co''er+ial and residential 'ortgage loan port2olios inherited 2ro' Wa+ho-ia B. Wells Fargo %e+urity is ne* in o22ering 'erger ad-i+e# sto+" and bond under*riting# loan syndi+ation and 2i4edin+o'e trading 1. Negati-e 6ui+" ratio by appro4i'ately J1@/ billion at year end 2001 'otal
C.

0.0B (.))

0.0B *.-(

SW.' Strate!ies

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Stren!t%s 0. %trong <nited %tates 'ar"et position in retail ban"ing a2ter Wa+ho-ia a+6uisition 2. Wells Fargo is a re+ogniHed brand *ith AB00 ban" bran+hes in the <.%. /. Well regarded and stable 'anage'ent tea' @. rti+ulated -ision and 'ission state'ents C. ;'pro-ing earnings and sto+" pri+e A. %trong te+hnology in2rastru+ture B. ;n (uly 2009# announ+ed a signi2i+ant e4pansion o2 the se+urity business unit

Wea"nesses 0. de6uate reser-es still being 6uestioned 2. !a+"s international presen+e against 'aIor global ban"s /. Wa+ho-ia brand is still present in 'any 'ar"ets @. Negati-e @th 6uarter earnings in 2001 C. %till assi'ilating Wa+ho-ia +ulture and in2rastru+ture A. Co''er+ial and residential 'ortgage loan port2olios inherited 2ro' Wa+ho-ia B. Wells Fargo %e+urity is ne* in o22ering 'erger ad-i+e# sto+" and bond under*riting# loan syndi+ation and 2i4edin+o'e trading 1. Negati-e 6ui+" ratio by appro4i'ately J1@/ billion at year end 2001

.pportunities 0. %tronger 0st hal2 2009 2inan+ial position +ould lead to 2urther e4pansion and a+6uisitions 2. 84pansion in international 'ar"ets /. &ro* se+urities and in-esting se+tor o2 the business as a result o2 Wa+ho-ia a+6uisition @. 8nhan+e Wells Fargo brand on 8ast Coast and globally C. Consensus a'ong e+ono'ists +on+erning late 2009 and 2000 re+o-ery A. ;n+rease in use o2 te+hnology and ;nternet 2or online ban"ing '%reats

S:. Strate!ies 0. Based on i'pro-ed earnings and stronger 2inan+ial position proIe+ted in 2000# e4pand internationally by opening bran+hes in 'ar"ets *ith strong e'ploy'ent and e+ono'i+ indi+ators )%C# 92# 9@# 9C, 2. 84pand the se+urity 'ar"et by +reating a di-ision geared to*ard 'iddle-high 'iddle in+o'e in-estors through online-in-esting )%0# %A# %B# 9/# 9A,

W:. Strate!ies
0. Consolidate se+urity and

under*riting into one unit utiliHing the strength o2 Wa+ho-ia.s se+urity and their +usto'ers )3C# 3B# 9/# 0A, 2. Close under per2or'ed bran+hes or e4+ess lo+ations in 'ar"ets that are not pro2itable )30# 3/# 31# 9A,

S:' Strate!ies

W:' Strate!ies

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0. ;n+rease regulations 2ro'

0. Create a tas" 2or+e to

2.

/.

@.

C.

regulatory agen+ies in 2inan+ial ser-i+es 8'erging legislature 'ay +onstrain 2reedo' in 2inan+ial ser-i+es 'ar"etpla+e 3rau'a +aused by 2inan+ial ser-i+es +risis inhibits in-est'ent in that se+tor &ro*ing dis+ontent o2 role o2 Federal $eser-e +ould result in 2urther 'ar"et tur'oil ;n+rease in une'ploy'ent rate +auses 'any to de2ault on loans and +redit +ard debt

ensure the ban"s are in +o'plian+e *ith all regulatory agen+ies o-erseeing the ban"s )%2# 30# 32# 3@, 2. 922er no 2ee ban"ing and no 'ini'u' a++ount balan+e# i'pro-ing the ban".s i'age by helping those *ho are une'ployed *hi+h +ould result in brand loyalty )%0# %2# %/# 3@# 3C,

0. 922er s'all businesses loans that ha-e lo* interest rates and that the s'all business +an payba+" the loan in longer ter'# se+ured *ith +ollateral and other 2or's o2 assets )W/# WA# 3/, 2. ;n+rease in ad-ertising and pro'otions using lo*er than a-erage +osts su+h as pop-up# 3*itter# Fa+eboo"# and other net*or"ing strea's )W/# W@# 3C,

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#.

SPACE Matrix F%
Conservative
B A C @ / 2 0

A!!ressiv e

;%
-B -A -C -@ -/ -2 -0 -0 -2 -/ -@ -C -A 0 2 / @ C A B

Defensiv e

-B

Competitiv e

8%

inancial Stabilit2 / S0 $eturn on ;n-est'ent !e-erage !i6uidity Wor"ing Capital Cash Flo* inancial Stabilit2 / S0 Avera!e Competitive Stabilit2 /CA0 Mar"et %hare Produ+t Guality Custo'er !oyalty Co'petition.s Capa+ity <tiliHation 3e+hnologi+al >no*-5o*

2 @ 2 / 2 *.;

Environmental Stabilit2 /ES0 <ne'ploy'ent 3e+hnologi+al Changes Pri+e 8lasti+ity o2 De'and Co'petiti-e Pressure Barriers to 8ntry Environmental Stabilit2 /ES0 Avera!e 3ndustr2 Stabilit2 /3S0 &ro*th Potential Finan+ial %tability 8ase o2 Mar"et 8ntry $esour+e <tiliHation Pro2it Potential

-C -2 -/ -/ -0 :*.<

-2 -2 -/ -2 -/

@ 2 0 / @

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Competitive Stabilit2 /CA0 Avera!e

:*.-

3ndustr2 Stabilit2 /3S0 Avera!e

*.<

7-a4is: F% L 8% M 2.A L )-2.1, M - 0.2 N-a4is: C L ;% M )-2.@, L )2.1, M 0.@

=.

#rand Strate!2 Matrix

&apid Mar"et #ro4t% Quadrant II Quadrant I

Wea" Competitive Position

Stron! Competitive Position

Quadrant III

Slo4 Mar"et #ro4t%

Quadrant IV

0. 2. /. @. C. A. B.

Mar"et De-elop'ent Mar"et Penetration Produ+t De-elop'ent For*ard ;ntegration Ba+"*ard ;ntegration 5oriHontal ;ntegration $elated Di-ersi2i+ation

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3.

'%e 3nternal:External /3E0 Matrix

'%e 3 E 'otal Wei!%ted Score %trong /.0 to @.0 ; -erage 2.0 to 2.99 ;; Wea" 0.0 to 0.99 ;;;

5igh /.0 to /.99

;:

;:

:;

'%e E E 'otal Wei!%ted Score

Mediu' 2.0 to 2.99

Wells ar!o Stores> 3nc.

:;;

:;;;

;N

!o* 0.0 to 0.99

?.

@SPM
84pand internationall y by opening 20 bran+hes in 8uropean and %# 'eri+an Mar"et AS 'AS ;'pro-e se+urity and under*riting units and pro'ote the' lo+ally in the <.% Mar"et AS 'AS

1e2 actors .pportunities

Wei!% t

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0. %tronger 0st hal2 2009 2inan+ial position +ould lead to 2urther e4pansion and a+6uisitions 2. 84pansion in international 'ar"ets /. &ro* se+urities and in-esting se+tor o2 the business as a result o2 Wa+ho-ia a+6uisition @. 8nhan+e Wells Fargo brand on 8ast Coast and globally C. Consensus a'ong e+ono'ists +on+erning late 2009 and 2000 re+o-ery A. ;n+rease in use o2 te+hnology and ;nternet 2or online ban"ing '%reats 0. ;n+rease regulations 2ro' regulatory agen+ies in 2inan+ial ser-i+es 2. 8'erging legislature 'ay +onstrain 2reedo' in 2inan+ial ser-i+es 'ar"etpla+e /. 3rau'a +aused by 2inan+ial ser-i+es +risis inhibits in-est'ent in that se+tor @. &ro*ing dis+ontent o2 role o2 Federal $eser-e +ould result in 2urther 'ar"et tur'oil C. ;n+rease in une'ploy'ent rate +auses 'any to de2ault on loans and +redit +ard debt '.'AA Stren!t%s 0. %trong <nited %tates 'ar"et position in retail ban"ing a2ter Wa+ho-ia a+6uisition 2. Wells Fargo is a re+ogniHed brand *ith AB00 ban" bran+hes in the <.%. /. Well regarded and stable 'anage'ent tea' @. rti+ulated -ision and 'ission state'ents C. ;'pro-ing earnings and sto+" pri+e A. %trong te+hnology in2rastru+ture B. ;n (uly 2009# announ+ed a signi2i+ant e4pansion o2 the se+urity business unit Wea"nesses 0. de6uate reser-es still being

0.0 0.09 0.09 0.0B 0.09 0.0 0.0 0.09 0.01 0.09 0.0 (.)) 0.01 0.0B 0.0A 0.0/ 0.01 0.01 0.09

/ @ 2 @ / 2 / 2 --@ @

0./ 0./A 0.01 0.21 0.2B 0.2 0./0 0.01 --0./A 0.@0 *.<+

@ / @ / @ @ 0 0 --2 2

0.@ 0.2B 0./A 0.20 0./A 0.@ 0.00 0.09 --0.01 0.20 *.,B

0 0 0 --0 --0

0.01 0.0B 0.0A --0.01 --0.09

/ @ @ --@ --@

0.2@ 0.21 0.2@ --0./2 --0./A

0.01

---

---

---

---

Copyright D 2000 Pearson 8du+ation# ;n+. publishing as Prenti+e 5all.

6uestioned 2. !a+"s international presen+e against 'aIor global ban"s /. Wa+ho-ia brand is still present in 'any 'ar"ets @. Negati-e @th 6uarter earnings in 2001 C. %till assi'ilating Wa+ho-ia +ulture and in2rastru+ture A. Co''er+ial and residential 'ortgage loan port2olios inherited 2ro' Wa+ho-ia B. Wells Fargo %e+urity is ne* in o22ering 'erger ad-i+e# sto+" and bond under*riting# loan syndi+ation and 2i4ed-in+o'e trading 1. Negati-e 6ui+" ratio by appro4i'ately J1@/ billion at year end 2001 S$B'.'AA S$M '.'AA A''&AC'3VE8ESS SC.&E

0.0B 0.0A 0.01 0.0A 0.0C 0.0@

--0 2 --0 0

--0.0A 0.0A --0.0C 0.0@

--/ 0 --2 @

--0.01 0.01 --0.0 0.0A

0.0B (.))

0.0B ).B; +.,C

0.20 *.(B -.B-

1.

&ecommendations
Consolidate the se+urity and under*riting units and then pro'ote the unit to e4isting +usto'ers through 2lyers# e'ail and other 'ediu'. Further spend an addition J/0 'illion pro'oting the unit to ne* +usto'ers by o22ering lo* +o''issions 2or the 2irst / trades.

L.

EPS/EBIT Analysis
J 'ount Needed: J10 'illion %to+" Pri+e: J2A.99 3a4 $ate: 01.CO ;nterest $ate: CO P %hares 9utstanding: @.B billion
Common Stoc" inancin! Recession Normal Boom J/00#000#000 JA00#000#000 J0#000#000#000 0 0 0 /00#000#000 A00#000#000 0#000#000#000 CC#C00#000 000#000#000 01C#000#000 2@@#C00#000 @19#000#000 10C#000#000 @#B02#9A@#0A0 @#B02#9A@#0A0 @#B02#9A@#0A0 Recession J/00#000#000 @#000#000 29A#000#000 C@#BA0#000 2@0#2@0#000 @#B00#000#000 Debt inancin! Normal Boom JA00#000#000 J0#000#000#000 @#000#000 @#000#000 C9A#000#000 99A#000#000 000#2A0#000 01@#2A0#000 @1C#B@0#000 100#B@0#000 @#B00#000#000 @#B00#000#000

8B;3 ;nterest 8B3 3a4es 8 3 P %hares

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).),

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).), B) Percent Debt : +) Percent Stoc" Recession J/00#000#000 100#000 299#200#000 CC#/C2#000 2@/#1@1#000 @#B00#119#201 ).),

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B) Percent Stoc" : +) Percent Debt Recession J/00#000#000 /#200#000 29A#100#000 C@#901#000 2@0#192#000 @#B02#0B@#1@/ ).),

Normal JA00#000#000 /#200#000 C9A#100#000 000#@01#000 @1A#/92#000 @#B02#0B@#1@/ ).()

Boom J0#000#000#000 /#200#000 99A#100#000 01@#@01#000 102#/92#000 @#B02#0B@#1@/ ).(B

Normal JA00#000#000 100#000 C99#200#000 000#1C2#000 @11#/@1#000 @#B00#119#201 ).()

Boom J0#000#000#000 100#000 999#200#000 01@#1C2#000 10@#/@1#000 @#B00#119#201 ).(B

M.

Epilo!ue

Wells Fargo has 2ound the se+ond 6uarter# 2009 to be a period o2 re+o-ery. While 'ost large ban"s and bro"erage 2ir's ha-e i'pro-ed their per+eption in the 'ar"etpla+e by reporting better earnings results# Wells Fargo se+ond-6uarter earnings soared 10O +reating a ne* +o'pany re+ord. Wells Fargo has been able to surpass the per2or'an+e o2 'ost ban"s. 3he sto+" pri+e has also sho*ed signs o2 re+o-ery. 2ter Wells Fargo sto+" dropped to a lo* o2 around J00 in early 2009# it has in+reased dra'ati+ally to al'ost J/0. $e+ent trading has resulted in a de+line to appro4i'ately J2/ as o2 'id-(uly# 2009. nalysts still raise +on+erns and 6uestions about loan proble's and reser-e issues. s a result# on (uly 22# 2009 *hen Wells Fargo announ+ed 6uarterly earnings# shares 2ell A.9 O in pre'ar"et a+ti-ity. 3hese trends has been 'irrored by 3he Finan+ial %ele+t %e+tor %PD$ Fund )N7%8:N!F, that see"s to pro-ide in-est'ent results that +orrespond to the pri+e and yield per2or'an+e o2 the 2inan+ial ser-i+es se+tor o2 the %QP C00 ;nde4 . 3his %PD 2und in+ludes a broad range o2 2inan+ial ser-i+e 2ir's in+luding ban"s# bro"erage houses# insuran+e and other di-ersi2ied 2inan+ial holding +o'panies. %u+h results ha-e been also helped by rebounding e+ono'i+ +onditions during the 2nd 6uarter. While all o2 these data are positi-e# Wells Fargo 'ust still be +autious gi-en that the global e+ono'y is still in re+ession. ;n addition# it is 6uite li"ely that <% ban"s *ill see greater regulation and higher reser-e re6uire'ents. Both o2 these issues *ill 'a"e it 'ore di22i+ult 2or ban"s# in+luding Wells Fargo# to e4perien+e the sa'e le-el o2 pro2it in the 2uture that e4perien+ed in the past. While there is reason to be +autious# Wells Fargo is strengthening its position to su++eed in this ne* en-iron'ent. s an e4a'ple o2 su+h +on2iden+e# Wells
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Fargo announ+ed in early (uly that it *ill be bolstering its se+urities business to +o'pete *ith 'aIor ban"s su+h as (.P. Morgan and Citigroup. 3he strategy espoused by C89 (ohn %tu'p2 is to= gro* and in-est=. 3he ban" plans to a-oid proprietary trading and +ontinue operating as an outstanding 2ull ser-i+e national institution *ith global aspirations. 3rading and in-est'ent 2ees a++ounted 2or J/ billion or about 0@O o2 the total re-enue. 92 that a'ount# the Wa+ho-ia part o2 the organiHation +ontributed roughly J2.2 billion or B/O. 3o that end Wells Fargo has +reated a ne* entity to be "no*n as Wells Fargo %e+urities +o'bining Wells Fargo a+ti-ities *ith Wa+ho-ia ;n-est'ent Ban"ing and Capital Mar"ets Businesses. Wells also announ+ed that it *ill be a++epting ;9<.s 2ro' the %tate o2 Cali2ornia 2ro' (uly 2 to (uly 00th in an e22ort to help the %tate stru+ture a plan to 2und its J2@./ billion de2i+it. ;n addition# it has enhan+ed its in2rastru+ture as illustrated by its Web site being ran"ed P0 in 3e+hnology ;nno-ation by the Broo"ings ;nstitute. 3he past 02 'onths ha-e pro-en 2ortuitous 2or Wells FargoR e-en *ith the +redit +risis and subpri'e 'ortgage 'eltdo*n. ;ts initial patien+e and then the aggressi-eness that it e4hibited in +apturing Wa+ho-ia 2ro' the grasp o2 Citigroup has in+reased the per+eption o2 its 'anage'ent *ithin the 2inan+ial ser-i+es *orld. ;t *ill be interesting to see ho* Wells Fargo +an +ontinue to +o'pete against the 'ore seasoned +o'petitors in the ban"ing industry *hile a-oiding the te'ptation to 'o-e outside its +o'2ort Hone in its 6uest 2or higher pro2its.

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