Wells Fargo vs Bank of America

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The Perfect Match: Wells Fargo vs. Bank of America
The banking industry is highly competitive. The financial services industry has been around for hundreds of years. Wells Fargo has many competitors itself. In this paper, I will be doing a comparison of Wells Fargo & Company (WFC) and one of its biggest competitors, Bank of America Corporation (BAC). By analyzing looking at the financial ratios, one can see whether the company is successful or not. In the following, I will try to analyze and make a comparison of Wells Fargo’s and Bank of America’s recent performance in growth, income, and efficiency. Using a these criteria, I will determine which bank is the better buy according my analysis. My analysis of WFC & BAC’s performances will include a discussion of… Background Information

Before analyzing and comparing both banks, one needs to know a little about the banks themselves. We already learned a little bit about Wells Fargo from the first paper. Now let’s look at Bank of America Corp. BAC is one of Wells Fargo’s major nationwide competitors. BAC, the nation’s largest bank and financial holding company, has 6,238 offices within the U.S. Bank of America had about 288,000 employees in its annual report for 2010. The CEO at Bank of America is Brian Moynihan. Analysis & Comparisons of WFC & BAC

The following is a table showing an overview of Wells Fargo’s financial performance and percent change compared to Bank of America, for the years 2009 and 2010. Table 1: Financial Highlights of Wells Fargo & Bank of America | | | | *Year Ended December 31,| | | |

 | Wells Fargo (WFC)| Bank of America (BAC)|
 | *2009| *2010| % Change| *2009| *2010| % Change|
Total Assets| $1.24 trillion| $1.26 trillion| 1%| $2.23 trillion | $2.26 trillion| 2%| Total Deposits | $824.0 billion| $847.9 billion| 3 | $991.6 billion | $1.0 trillion| 1| Total Loans | $782.8 billion| $757.3 billion| (3)| $900.1 billion | $940.4 billion| 4 | Total Equity| $114.4 billion| $127.9 billion| 12 | $231. 4 billion | $228.2 billion| (1)| Net Interest income| $46.3 billion| $44.8 billion| (3)| $48.4 billion | $52.7 billion| 9 | Operating Expense (non-interest expense)| $49.0 billion| $50.5 billion| 3 | $66.7 billion | $83.1 billion| 25 | Operating Income (non-interest income)| $42.4 billion| $40.5 billion| (5)| $72.5 billion | $58.7 billion| (19)| Pre-tax net income| $18.0 billlion| $19.0 billion| 6 | $4.4 billion | $(1.3) billion| (130)| Net Income (loss)| $12.3 billion| $12.4 billion| 1 | $6.3 billion | $(2.2) billion | (135)| *Source: WFC & BAC 2010 10-K; moneycentral.msn.com|

As shown in Table 1, at December 31, 2010, WFC’s total assets were $1.3 trillion, an increase of $14.5 billion, or 1%, from December 31, 2009. Shareholder’s equity had a $14.62 billion increase. This increase was probably due to the net income gains mentioned previously; nevertheless, the increase was partly offset as a result of a reduction in Securities Available for Sale. On the other hand, at December 31, 2010, BAC’s total assets were $2.3 trillion, an increase of $34.7 billion, or 2%, from December 31, 2009. Therefore, it is clear that BAC has about $1.0 trillion more in total assets than WFC. WFC has less total assets because the company only focuses its business operations on the domestic U.S. market. WFC’s lack of international exposure contrasts with BAC. Although WFC holds assets overseas, it remains strongly focused on the U.S. domestic market. While this does allow Wells Fargo to focus its resources on gaining greater market share within the U.S., Wells Fargo is thereby more vulnerable to the U.S. economic cycles, as it does not have foreign markets to buffer domestic performance.

Year-end deposits of Bank of America increased $18.8 billion to $1.0 trillion in 2010 compared to 2009. The increase was attributable to growth in Bank of...
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