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Wells Fargo
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Wells Fargo & Co. is a diversified financial services company with operations around the world. Wells Fargo is the 4th largest bank in the US by assets and the second largest bank by market cap. It is the only bank in the United States to be rated AAA by S&P.
Headquartered in San Francisco, California (its bank, Wells Fargo Bank, N.A., is legally chartered in Sioux Falls,SD), Wells Fargo is a result of a merger between California-based Wells Fargo & Co.
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Encyclopedia
Wells Fargo & Co. is a diversified financial services company with operations around the world. Wells Fargo is the 4th largest bank in the US by assets and the second largest bank by market cap. It is the only bank in the United States to be rated AAA by S&P.
Headquartered in San Francisco, California (its bank, Wells Fargo Bank, N.A., is legally chartered in Sioux Falls,SD), Wells Fargo is a result of a merger between California-based Wells Fargo & Co. and Minneapolis-based Norwest Corporation in 1998. The new company chose to keep the name Wells Fargo, to capitalize on the 150-year history of the nationally-recognized Wells Fargo name and its trademark stagecoach. After the merger, the company maintained its headquarters in San Francisco, CA and charter in Sioux Falls, SD.
Wells Fargo was named as "The World's Safest US Bank" based on long-term foreign currency ratings from Fitch Ratings and Standard & Poor's and the long-term bank deposit ratings from Moody’s Investors Service for the year 2007.
As of 2009, Wells Fargo has 6,650 retail branches (called stores by Wells Fargo), 12,260 Automated Teller Machines, 276,000 employees and over 48 million customers. Wells Fargo currently operates stores and ATMs under the Wells Fargo and Wachovia names.
Lines of business
Wells Fargo offers a range of financial services in over 80 different business lines. Wells Fargo delineates three different business segments when reporting results: Retail Banking, Wholesale Banking, and Consumer Finance.
Community banking
The Community Banking segment includes Regional Banking, Wealth Management Group, Diversified Products and the Consumer Deposits groups. Wells Fargo consumer clients are encouraged to purchase multiple-product packages offering preferred client discounts. Examples of such packages are:
- "Wells Fargo College Checking Account" tied to college students free for 5 years;
- "Wells Fargo Premium Membership Account" tied to payroll direct deposit from a participating employer;
- "Wells Fargo Complete Advantage Account" tied to balances in multiple deposit accounts, loans, or a home mortgage;
- "Wells Fargo Portfolio Management Account" tied to balances in brokerage accounts, IRAs, deposits, and loans.
Wells Fargo also has around 9,400 stand alone mortgage branches throughout the country. It also does mortgage wholesale lending through independent mortgage brokers.
Brokerage
Wells Fargo offers investment products through its inhouse brokerage services and Wachovia Securities. It also offers mutual funds under the Wells Fargo Advantage brand name and Evergreen Funds.
Calibre
Calibre is a subsidiary that Wells Fargo currently uses for its wealth management services to ultra-high net worth families with net worth exceeding $25 million. Calibre was acquired as part of the purchase of Wachovia.
Internet services
Wells Fargo launched its personal computer banking service in 1989 and was the first bank to introduce access to banking accounts on the web in May 1995.
Wells Fargo's Business Online Banking gives small business owners all the services available to consumers, plus services designed specifically for businesses.
The new Wells Fargo vSafe service offers online storage of documents.
Wholesale
The Wholesale Banking segment contains products sold to large and middle market commercial companies, as well as to consumers on a wholesale basis. This includes lending, treasury management, mutual funds, asset-based lending, commercial real estate,corporate and institutional trust services, and investment banking through Wells Fargo Securities. Wells Fargo historically has avoided large corporate loans as stand-alone products, instead requiring that borrowers purchase other products along with loans-- which the bank sees as a loss leader. One area that is very profitable to Wells, however, is asset-based lending: lending to large companies using assets as collateral that are not normally used in other loans. This can be compared to subprime lending, but on a corporate level. The main brand name for this activity is "Wells Fargo Foothill," and is regularly marketed in tombstone ads in the Wall Street Journal. Wells Fargo also owns Eastdil Secured, which is described as a "real estate investment bank" but is essentially one of the largest commercial real estate brokers for very large transactions (such as the purchase and sale of large Class-A office buildings in central business districts throughout the United States).
Consumer finance
Wells Fargo Financial is the consumer finance segment. It engages in lending through over 1,000 branches throughout the U.S. and in certain other countries. This division also engages in "indirect lending" for such organizations as furniture retailers. This business is based out of Des Moines, Iowa. Norwest purchased DIAL Finance before its acquisition with Wells Fargo. The Home Mortgage group is based out of West Des Moines, Iowa. Wells Fargo Financial's core product is sub-prime mortgage lending. Other products include auto secured lending, personal lines of credit and unsecured credit cards. All Wells Fargo Financial products carry sub-prime rates regardless of consumer credit score. Wells Fargo Financial Team members generate sales via telephone solicitations of current Wells Fargo Financial customers through a company developed program. Team members also generate sales through Wells Fargo Bank referrals and walk ins.
Business model
The present business model of Wells Fargo is summed up in its vision statement: "We want to satisfy all of our customers' financial needs, help them succeed financially, be the premier provider of financial services in every one of our markets, and be known as one of America's great companies."
Wells Fargo's goal is to encourage its customers to buy all their financial products through Wells Fargo: "We want to earn 100 percent of our customers' business. The more products customers have with Wells Fargo the better deal they get, the more loyal they are, and the longer they stay with the company, improving retention. Eighty percent of our revenue growth comes from selling more products to existing customers. Our goal: sell at least eight products to every customer."
This is a concept known as "cross-selling," or as Wells Fargo refers to it, "needs-based selling," which is popular in the financial services industry. While earlier companies, such as Prudential, pioneered the concept of selling a variety of products, they acted merely as holding companies and each product was sold through its own distribution channel. However, predecessor Norwest pioneered selling all its products through all its channels, with discounts given to those who purchase a larger variety.
The average "cross-sell ratio" for a financial institution is two (based on an average American consumer owning sixteen different financial products from eight different institutions). Wells Fargo purports to have a cross-sell ratio of 5.5 (2007 data) products per Community Banking household (almost one in five have more than eight), 6.1 (2007 data) for Wholesale Banking customers, and the average middle-market commercial banking customer has more than seven products, which is among the highest in the country. (Washington Mutual was beating them at the end of 2003 with a 5.59 ratio.)
History
The current Wells Fargo is a result of a 1998 merger between Minneapolis-based Norwest Corporation and the original Wells Fargo. Although Norwest was the nominal survivor, the new company kept the Wells Fargo name to capitalize on the long history of the nationally-recognized Wells Fargo name and its trademark stagecoach (the company's slogan, "The Next Stage," is a nod to the company's wagons-west motif). After the acquisition, the parent company moved its headquarters to San Francisco.
Wachovia acquisition superceding plans by Citigroup
On October 3, 2008, Wachovia agreed to be bought by Wells Fargo for about $14.8B in an all stock transaction. This news came four days after the FDIC made moves to have Citigroup buy Wachovia for $2.1B. Citigroup protested Wachovia's agreement to sell itself to Wells Fargo and threatened legal action over the matter. However, the deal with Wells Fargo is expected to overwhelmingly win shareholder approval as it values Wachovia at about 7 times what the Citigroup deal valued Wachovia. To further ensure shareholder approval, Wachovia issued Wells Fargo with preferred stock that holds 39.9% of the voting power in the company. On October 4, 2008, a New York state judge issued a temporary injunction blocking the transaction from going forward while the situation was sorted out. Citigroup alleges that they had an exclusivity agreement with Wachovia that barred Wachovia from negotiating with other potential buyers. The injunction was overturned late in the evening on October 5, 2008, by New York state appeals court.
Citigroup and Wells Fargo had entered into negotiations brokered by the FDIC to reach an amicable solution to the impasse. Those negotiations failed, however. Sources say that Citigroup was unwilling to take on more risk than the $42B that would have been the cap under the previous FDIC-backed deal (with the FDIC incurring all losses over $42B). While Citigroup was no longer attempting to block the merger, they indicated they will seek damages of $60B for breach of an alleged exclusivity agreement with Wachovia.
Corporate predecessors
The holding company was previously known as Norwest Corporation and before that as Northwestern National Bank (BANCO). Norwest was "one of the most acquisitive banks of the 1990s...." Most of the management and the business model of the present day Wells Fargo come from Norwest Bank, and the stock history of Wells Fargo is that of Norwest.
Selected predecessor companies
2008 Financial Crisis
On October 28, 2008, Wells Fargo and Company was the recipient of $25B of the Emergency Economic Stabilization Act Federal bail-out in the form of a preferred stock purchase. They did not want a bailout but were one of nine banks forced by then-Secretary of the Treasury Henry Paulson to take one.
Key dates
- 1852: Henry Wells and William G. Fargo, the two founders of American Express, form Wells Fargo & Company to provide express and banking services to California.
- 1860: Wells Fargo gains control of Butterfield Overland Mail Company, leading to operation of the western portion of the Pony Express.
- 1866: 'Grand consolidation' unites Wells Fargo, Holladay, and Overland Mail stage lines under the Wells Fargo name.
- 1904: A.P. Giannini creates the Bank of Italy in San Francisco.
- 1905: Wells Fargo separates its banking and express operations; Wells Fargo's bank is merged with the Nevada National Bank to form the Wells Fargo Nevada National Bank.
- 1918: As a wartime measure, the U.S. government nationalizes Wells Fargo's express franchise into a government agency known as the American Railway Express Agency. The government takes control of the express company. The bank begins rebuilding but with a focus on commercial markets.
- 1923: Wells Fargo Nevada merges with the Union Trust Company to form the Wells Fargo Bank & Union Trust Company.
- 1928: Giannini forms Transamerica Corporation as a holding company for his banking and other interests.
- 1929: Northwest Bancorporation, or Banco, is formed as a banking association.
- 1954: Wells shortens its name to Wells Fargo Bank.
- 1957: Transamerica spins off its banking operations, including 23 banks in 11 western states, as Firstamerica Corporation.
- 1960: Wells Fargo merges with American Trust Company to form the Wells Fargo Bank American Trust Company.
- 1961: Firstamerica changes its name to Western Bancorporation.
- 1962: Wells again shortens its name to Wells Fargo Bank.
- 1968: Wells converts to a federal banking charter, becoming Wells Fargo Bank, N.A.
- 1969: Wells Fargo & Company holding company is formed, with Wells Fargo Bank as its main subsidiary.
- 1981: Western Bancorporation changes its name to First Interstate Bancorp.
- 1982: Banco acquires consumer finance firm Dial Finance which is renamed Norwest Financial Service the following year.
- 1983: Banco is renamed Norwest Corporation.
- 1983: Largest U.S. bank heist to date takes place at a Wells Fargo depot in West Hartford, Connecticut.
- 1986: Wells Fargo acquires Crocker National Corporation from Midland Bank.
- 1987: Wells Fargo acquires the personal trust business of Bank of America.
- 1988: Wells Fargo acquires Barclays Bank of California from Barclays plc.
- 1995: Wells Fargo becomes the first major financial services firm to offer Internet banking.
- 1996: Wells Fargo acquires First Interstate for $17.3 billion.
- 1998: Wells Fargo Bank merges with Norwest Corp. of Minneapolis. Norwest changes its name to Wells Fargo and moves to San Francisco.
- 2000: Wells Fargo acquires First Security Corporation.
- 2001: Wells Fargo acquires H.D. Vest Financial Services.
- 2007: Wells Fargo acquires CIT Construction.
- 2007: Wells Fargo acquires Placer Sierra Bank.
- 2007: Wells Fargo acquires Greater Bay Bancorp.
- 2008: Wells Fargo acquires Century Bancshares.
- 2008: Wells Fargo acquires Wachovia Corporation.
Environmental record
Wells Fargo has received awards for environment in Green Power Leadership Club, Partner of the Year 2007 and is in the top 25 of Green Power Partnership. In line with its commitment to the environment, Wells Fargo purchases renewable energy certificates (RECs) to support the generation of 550 million kilowatt-hours of clean, renewable wind energy per year. “This commitment reflects the desire of our team members to do what’s right for our customers, our communities, and our company. By purchasing RECs we are advancing our efforts to reduce our greenhouse gas emissions while doing our part to encourage the development of new renewable energy sources,” said Mary Wenzel, Vice President of Environmental Affairs. Through its green power purchase, Wells Fargo is helping to address important business and societal issues such as rising energy costs, poor air quality and climate change and taking steps toward achieving its goal of integrating environmental responsibility throughout the Company’s business practices and operations. Wells Fargo has also announced a ten-point environmental commitment to more effectively integrate environmental responsibility into its business practices and procedures.
Recent controversies
Like many large-scale companies, Wells Fargo has attracted many vocal detractors who protest their business practices, customer service, fee levels, and other aspects of the company. There is even a project dedicated to tracking all alleged instances of corporate malfeasance, especially ongoing investigations into alleged predatory lending practices in Wells' mortgage division.
Wells Fargo has been the target of activist actions because they are one of the largest investors into the GEO Group. The GEO Group operates private prisons and immigrant detention facilities which have been criticized for serious abuses of detainees.
Also see GEO Group Controversy
In September 2003, New York State Attorney General Eliot Spitzer sought information about the lending practices of Wells Fargo and other national banks. Two suits seeking injunctive relief were filed against Spitzer, one by the Office of the Comptroller of Currency and one by the Clearinghouse association of banks, asserting that Spitzer had no authority to regulate the activities of national banks. The suits both resulted in the granting of injunctive relief preventing the continuation of Spitzer's efforts to obtain bank information, including Wells Fargo information.
In December 2005, the parachurch group Focus on the Family ended its banking relationship with Wells Fargo. This was due to Wells Fargo's support of the gay rights movement when the company announced that it was matching contributions to GLAAD. Wells Fargo continued the program and received widespread support in the face of the boycott, which had no other high-profile participants.
The relationship between the bank's Board of Directors and its shareholders has at times been contentious. The Board of Directors has recommended voting against every single shareholder proposal since 2002. Many of these proposals were warnings to the company, heeding them to stop predatory lending and other controversial practices.
Wells Fargo corporate buildings
*Wells Fargo Center in Los Angeles, California
- Wells Fargo Place in Saint Paul, MN
- Wells Fargo Center in Minneapolis, MN
- Wells Fargo Center in Denver, CO
- Wells Fargo Center in West Des Moines, IA
- Wells Fargo Plaza in Houston, TX
- Wells Fargo Plaza in Phoenix, Arizona
- Wells Fargo Center in Portland, OR
- Wells Fargo Center in Salt Lake City, UT
- Wells Fargo Center in Sacramento, CA
- Wells Fargo Headquarters in San Francisco, CA
- Wells Fargo Plaza in El Paso, TX
- Wells Fargo Center in Albuquerque, NM
- Wells Fargo Tower in Colorado Springs, CO
- Wells Fargo Center in Seattle, WA
- Wells Fargo Center in Boise, ID
- Wells Fargo Center in Spokane, WA
See also
External links
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