Wells Fargo and Company is a company based in the United States. The company offers financial services to individuals, corporations, and other entities around the world. The company offers consumer banking and lending, asset and wealth management, investment banking, and commercial banking services. The company was founded in 1852.
Why You Should?
- Wells Fargo is a great reopening play in an investor’s portfolio. As the economy strengthens after the pandemic is over, the demand for many of Wells Fargo’s products (especially consumer and investment banking) will go up as consumers and companies around the world will return to normal, something that will benefit the company.
- Wells Fargo currently manages over 1.9 trillion dollars in assets through all of its channels combined. This makes Wells Fargo one of the largest banks in the world. Because Wells Fargo makes money by taking fees for managing assets, the company will see a good stream of recurring revenue from its asset management. This will also benefit investors in the company.
- Wells Fargo is an extremely popular middle-class bank. According to Wells Fargo, the company offers financial services to 1 in 3 households in the United States and over 10% of all small to medium-sized businesses. This wide reach across the nation will benefit the company’s future growth and will also benefit investors in the company.
- The Federal Reserve will most likely look to increase interest rates before the year ends. This action shows that the economy is starting to pick up the pace and strengthen after the pandemic. High-interest rates usually help banks boost their margins as they can start charging more for new loans. In addition to this, a strengthening economy will also benefit banks.
Why You Should Not?
- The company faces tough competition in the banking industry. Some of these competitors include Goldman Sachs, Bank of America, and JP Morgan Chase. This competition might hurt the company and its investors in the future.
- The company unraveled after it was found out that it was making additional accounts for customers without consent in order to boost quarterly numbers. This scandal caused the company’s stock price to crash and regulators around the world to sanction and charge the company. This has negatively impacted the company and its investors.
- Even though the scandal was in 2016, the company still faces fallout for it. Recently, the company was charged a 250 million dollar fine as regulators were not happy with the company’s handling and recovery operation stemming from the scandal. In addition to this, a cap (2 trillion) on the number of assets that it can manage will also hurt the company and investors.
I do not think Wells Fargo is a good investment in the mid to long-term because of tough competition, the fake accounts scandal, and the continued fallout from this scandal. However, the company is a good reopening play, manages a large number of assets, will benefit from rising rates, and is an extremely popular bank amongst the middle class.