|Instrument:WELLS FARGO & CO|
Headquartered in San Francisco, California, US, Wells Fargo & Co. is a global diversified financial services firm that boasts over 70 million customers located in over 40 countries around the world. The bank is considered a systematically important bank and it serves individuals, small businesses, and large businesses through 5 business segments: Community Banking, Wealth and Investment Management, Consumer Lending, Wholesale Banking, as well as Payments, Virtual Solutions, and Innovation. With over $1.9 trillion in assets, Wells Fargo is one of the ‘Big Four’ banks in America, serving one in three households in the country. The bank was founded in 1852 by Henry Wells and William Fargo.
Wells Fargo describes itself as a bank that is strong for its customers and communities. Its journey started by offering solutions to its community. Wells Fargo was founded during the 19th century California Gold Rush, and its services included offering cost-effective express and banking services. By the end of the mania, Wells Fargo had grown to be a notable express and banking company. However, at the turn of the 20th century, it would spin off its express business to concentrate on banking and financial services. Wells Fargo has always prided itself as an innovative bank that seeks to provide practical solutions to its customers. Notably, it was the first ever bank to offer internet banking as early as 1995. But its history has also been defined by multiple mergers and acquisitions. Its most defining deal was the 1998 merger with Northwest Corporation. Major acquisitions since then include Greater Bay Bancorp and Wachovia. The company has also divested some of its assets such as Canadian Direct Equipment Finance and Wells Fargo Asset Management.
Wells Fargo is listed on the NYSE, where its stock trades under the ticker symbol WFC (NYSE: WFC price). The stock is categorized in the Financial Services sector, under Banks-Diversified.
WFC Stock Trading
Since the 1998 merger, Wells Fargo has split its stock only once: a 2-for-1 implemented on August 14th, 2006. At the turn of the millennium, Wells Fargo traded with a split-adjusted price of around $20. The Wells Fargo share price steadily drifted upwards to below $40 by mid-2007. The effects of the Great Recession then triggered a sharp selloff to below $10 by March 2009.
However, the subsequent stock market recovery saw Wells Fargo shares embark on a multi-year uptrend, with the WFC stock printing its all-time high above $65 by January 2018. The subsequent price pullback was further overextended by the effects of the 2020 Great Recession, with the Wells Fargo share price dipping to circa $20 by October 2020. The stock has since recovered and currently trades above $40 as of July 2022.
Regarding the Wells Fargo dividend per share, Wells Fargo is a willing dividend payer, something that adds to the appeal of its stock. The company has, in recent years, maintained a healthy and sustainable dividend payout ratio of about 15%, and averaged a dividend yield of around 2%.
How to Trade Wells Fargo Stock
Here are some of the factors to consider when trading WFC stock:
- Regulatory Issues
The banking industry has been the target of tough regulatory scrutiny since the 2008 Financial Crisis. There is even closer attention paid to systemic banks such as wells Fargo. Major legislative areas include data security and privacy, anti-money laundering and know-your-customer guidelines, financial technologies, asset caps, as well as overall governance and conduct.
- Negative PR and Lawsuits
Wells Fargo has been very scandalous in recent years. The company was infamously busted by US Consumer Financial Protection Bureau in 2016 for opening millions of fake customer accounts, a scandal that eventually cost the company over $3 billion in fines. There have been also numerous controversies that include overcharging credit card fees, illegal repossession of cars, as well as unethical practices in its mortgage loans. Negative headlines can cost the company financially, but also dampen the mood of investors towards the WFC stock.
- Monetary Policy
Banking stocks are incredibly sensitive to the prevailing monetary policy. As a case, during the 2020 coronavirus pandemic, the WFC stock suffered massively as interest rates were cut aggressively. High-interest rates positively impact the bottom line of Wells Fargo and can provide massive tailwinds for the stock.
The financial services industry is very competitive. Wells Fargo not only has to deal with major rivals such as JPMorgan Chase and Citigroup but also with other diversified financial services providers such as mutual funds, insurance providers, savings and loans associations, as well as non-bank institutions such as securities brokerage firms. Advances in technology have also led to the emergence of other nimbler financial services providers that enjoy easy entry and are not under tough regulatory scrutiny.
- Periodic Earnings Reports
The Wells Fargo fiscal year runs from January 1st to December 31st. The company releases periodic earnings reports to update its investors on its business health and performance. Some of the metrics to watch out for include revenue, net interest income, expenses, reverse capital releases, dividends, and future guidance. WFC stock typically receives tailwinds on positive results and headwinds on negative results.
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