Wells Fargo & Co (US)

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Wells Fargo & Co has established itself as one of America's biggest banks by erring on the side of caution rather than reckless expansion. The business was created over the past two decades in a series of careful acquisitions, not least the purchase in 1998 of the original Wells Fargo company by Norwest Corp. However the defining deal to-date came at the end of 2008. Seizing the opportunities provided by the general meltdown in the financial services industry it snapped up failing competitor Wachovia, doubling in size to become one of the country's two biggest retail banks, even overtaking rival Bank of America in several areas. It is now America's single biggest financial services company by outlets, with a vast network of 8,700 retail "stores" spread across 39 US states; also the biggest mortgage lender, having overtaken BofA in 2011; and was until late 2016 the world's most valuable bank by market capitalisation.

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Adbrands Weekly Update 20th Oct 2016: The wind appeared to change direction for US banks during 3Q, helped along by the strengthening domestic economy and continuing troubles for several continental European rivals. After several quarters of weak or worse performance in their investment banking divisions, JPMorganChase, Citigroup and Bank of America all enjoyed a sharp uplift. Revenues from trading of fixed income, currencies and commodities (or FICC) jumped 48% for JP Morgan in 3Q, 39% for Bank of America and 35% for Citi. Wells Fargo also enjoyed a small contribution from FICC, where it only recently began to establish a presence following the purchase of parts of GE Money. This surge helped to offset another weak performance across the board in consumer banking, still hamstrung by low interest rates. JPMorganChase, Wells Fargo and Bank of America all reported modest year-on-year growth in combined revenues, though Citigroup was down slightly. Bank of America was the only one of the four to report a rise in net profits year-on-year, chalking up its best quarterly performance since 2008. Better still were the profits at Goldman Sachs and Morgan Stanley, banks with a much larger exposure to investment banking. Both reported a 60% leap on the bottom line, on revenues up 19% and 15% respectively.

Adbrands Weekly Update 13th Oct 2016: After two weeks of unrelenting pressure over Wells Fargo's fake accounts scandal, chairman & CEO John Stumpf stepped down from both roles with immediate effect in an attempt to draw a line under the furore. Following an internal investigation, Wells Fargo admitted that it found employees had routinely faked sales of new banking products to customers in order to hit their targets. New accounts were opened for existing customers without their consent or knowledge, or products were allocated to fictitious new clients. Wells Fargo said it has sacked more than 5,000 employees over the past five years for improper behaviour. It has also ended sales goals for employees. The bank's recently appointed president & COO Timothy Sloan is immediately promoted to CEO, while lead independent director Stephen Sanger, a former CEO of General Mills, becomes chairman.

Adbrands Weekly Update 6th Oct 2016: Wells Fargo remains under intense pressure from regulators, and now customers as well, over its fake accounts scandal. The US state of California - where Wells Fargo is headquartered - introduced a one year ban on doing business with the bank, and Illinois has followed suit this week, withdrawing around $30bn of short-term investments which had been brokered by the banking group. Hillary Clinton has also weighed in on the campaign trail, accusing the bank of “bullying thousands of employees into committing fraud against unsuspecting customers" by setting unfeasibly high targets for sales of new products. “It is outrageous," she said, "that eight years after a cowboy culture on Wall Street wrecked our economy we are still seeing powerful bankers playing fast and loose with the law."

Adbrands Weekly Update 22nd Sep 2016: Wells Fargo, famed for its prowess in cross-selling additional products to its customers, was fined $185m over allegations that staff in the main "community banking" division had taken to writing up bogus sales for existing customers without their knowledge or consent, or even inventing fictitious customers in order to hit sales targets. As many as 2m fake deposit and credit card accounts were opened over a period of five years. Wells Fargo neither admitted nor denied the allegations, but confirmed that it has fired as many as 5,300 employees for improper sales practises in recent years. Carrie Tolstedt, SVP & head of community banking took early retirement in July this year, not long after the situation came to light. Wells Fargo CEO John Strumpf was summoned to Washington to be hauled over the coals by an irate Senate committee, some members of whom have demanded his resignation and the surrender of his substantial bonuses. He apologised for the situation, but denied it was a co-ordinated scam on the bank's part. The bank has agreed to compensate those customers in whose name fake accounts were created. The scandal hit Wells Fargo's stock price, causing it to lose its position as America's most valuable bank by market cap for the first time since 2013.

Adbrands Weekly Update 21st Jul 2016: JPMorganChase kicked off the quarterly reporting season as usual last Thursday, with better than expected 2Q figures after the first quarter's sharp slowdown. An uplift in bond and currency trading and a rise in consumer loans fuelled modest revenue growth, but profits slipped against the year-ago quarter. It was a similar picture at Wells Fargo; Citi and Bank of America also reported dips in net profit against the year ago period, but revenues slipped as well. Even so, all four came in above analysts' more pessimistic expectations, reinforcing general confidence about the underlying strength of the US economy. The sector's biggest surprise came from Goldman Sachs, which reported a spectacular surge in performance after a very weak first quarter, and also for 1Q 2015 as a result of litigation provisions. A big increase in M&A activity helped to push earnings and revenues well ahead of expectations. There was a similar but less marked performance at Morgan Stanley.


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Background

Free for all users | see full profile for current activities: Like most of its competitors the current Wells Fargo has been assembled through merger or acquisition of a string of other groups. The original business was established in California in 1852 by Henry Wells and William Fargo, then the principals of New York's American Express Company. The board of that company considered the Wild West too risky to allow a branch of American Express there, so Wells and Fargo established it as a separate business of their own. The most important commodity carried by the delivery service was gold, and as a result the company soon began to offer commercial banking to its customers. The delivery business was officially spun off in 1905. 

For the next 70 years or so, Wells Fargo was primarily a city bank for San Francisco, but expanded its network to cover all of California by the end of the 1980s through the acquisition of rival Crocker and the local branches of the UK's Barclays. In 1996 it acquired First Interstate Bancorp, a multi-regional banking network first created by the founder of Bank of America in the 1920s. Two years later, Wells Fargo was itself acquired by Norwest Corporation, originally a cooperative of regional banks from Minnesota and the North West United States. The merged business retained the more celebrated Wells Fargo brand and image. The group's network expanded still further in 2000 with the acquisition First Security, another multi-state banking group based in Utah and various South Western states. 


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