Not all banks are created equal, and
Wells Fargo (NYSE:
WFC), one of the most well-run banks in the country, is proof positive. Like fellow competitors
Bank of America (NYSE:
BAC) and
US Bancorp (NYSE:
USB) demonstrated, all U.S. banks were not spared the wrath of the real estate and credit markets when they came crashing down.
Managing Risk Management
Yet Wells Fargo has managed to prosper while most have faltered. For the full-year 2009, Wells Fargo earned record
net income of $12.3 billion on record revenue of $89 billion. If that wasn't enough, the company's pre-tax pre-provision profit, defined as total revenues minus non-interest expense, was a staggering $39.7 billion. To put this figure in perspective, it was more than twice the amount of net
charge-offs. Wells Fargo's numbers are all the more impressive when you consider that both Bank of America and
Citigroup (NYSE:
C) still continue to report staggering losses. (For related reading, check out
3 Secrets Of Successful Companies.)
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An Immensely Profitable Institution
On an
earnings per share basis, Wells Fargo earned $1.76 for the 2009 year. Unlike other major banks, Wells Fargo and
Goldman Sachs (NYSE:
GS) actually did not need the infusion of
TARP money. Consider this EPS figure when Wells Fargo was trading for under $10 a share last year. On a going-forward basis, investors could have bought one of the best banks in the country, endorsed by no less than
Warren Buffett, for less than four times
forward earnings.
Still Working
While Wells Fargo has clearly demonstrated its superiority among many other financial institutions, the U.S. is a far cry away from a normal credit and real estate market. All that means is a continued environment where Wells Fargo will outshine the rest. In banking, management is everything, and Wells Fargo has excellent management that knows how to manage risk. Today and tomorrow, Wells Fargo will solidify its position as the standard of banking excellence.
For more, check out
The Evolution Of Banking.
