Wells Fargo (WFC) was founded in 1852 and is the third-largest bank in the country as measured by assets.
As borrowers, consumers and businesses are most concerned with getting access to dependable financing at the lowest interest rate possible.Despite Wells Fargo’s impressive past track record, the bank has recently fallen from grace, and in a big way.Given the continued improvements at its rivals, most notably JPMorgan Chase and Bank of America, it is looking increasingly possible that Wells Fargo might no longer be the best large bank in America. Based on our analysis below, we are downgrading Wells Fargo's Dividend Safety Score from Borderline Safe to Unsafe. That’s because, even at the peak of the crisis, loan losses only amounted to 2.71% of assets. Learn more. The severity and duration of the pandemic remain unknown, but pressure has continued to increase on Wells Fargo's dividend. These giant legal bills have caused Wells Fargo’s once industry-leading efficiency ratio (expenses/revenue) to soar to 76%, compared to about 55% before the scandals came to light.Recently, the Federal Reserve has implied that it wants banks to have a much more conservative earnings payout ratio near 30%. Wells Fargo’s rating was below the average for regional banks, as well as below that of JPMorgan and Bank of America (BAC).According to Wells Fargo’s annual reports, the company’s total deposits have grown from $3.7 billion in 1966 to $1.3 trillion in 2017, representing approximately 12% annual growth over that period.
It simulates a severe global economic recession to see how a bank’s assets will hold up in order to minimize the chances of another global financial catastrophe that puts the world’s economy at risk. WFC's next quarterly dividend payment will be made to shareholders of record on Tuesday, September 1. The company gains competitive advantages from its substantial scale, low-cost deposit base, strong capitalization, and leading market share positions.Specifically, the goal was to make Wells Fargo the hands-down best bank at cross-selling its customers numerous services. History prior to November 1998 refers to the Norwest Corporation. For example, Wells Fargo used to command the highest customer satisfaction ratings of any large U.S. bank, but JD Power’s 2017 satisfaction survey found that its rating had fallen to 7th in the nation. The other two attractions were its ability to grow faster than its peers (but with lower risk) and achieve some of the top profitability in the industry.Now, the bank is literally been blocked from growing its asset base, for an unknown period of time. The order is not related to any new matters, but to prior issues where Wells Fargo is working to make progress.Unlike many big banks, Wells Fargo has little exposure to investment banking and trading operations. There is no talk of bank bailouts this time around.Investors have focused on a rise in record prices for gold, but silver’s up nearly 25% in July—the metal’s second-biggest monthly gain on record—and it’s still undervalued compared with the yellow metal.Scroll the table to see all of the data.That points not only to loan forbearances and credit losses, but also to continued pain for countless businesses of all sizes that owe money to the banks.The analysts wrote that “Wells Fargo’s issues appear self-isolated,” as the bank continues to operate under strict regulatory supervision in the wake of several customer-service scandals. Only JPMorgan Chase (JPM), which also followed a highly conservative banking strategy, was able to repeat this feat.However, there is a real risk that Wells Fargo’s long-term industry-leading growth is now a thing of the past, due to two reasons. The end result was very strong earnings and dividend growth, which historically made Wells Fargo one of the best long-term investments in banking.Investors may therefore decide to reduce the safety and quality valuation multiple premium historically enjoyed by the stock.In fact, Berkshire owns nearly $30 billion worth of Wells Fargo stock (over 9% of the company), making it one of Buffett’s largest equity holdings.