This enormous scale has given WFC the ability to focus on their core growth strategy, which is cross-selling their very diversified list of financial products, including credit cards, mortgages, personal lines/loans, student loans, auto loans and wealth-management services.
Cross-selling has also led to a much higher ratio of products per customer, with a much longer tenure, as compared to other similar banks. Sanford and Bernstein report that at the end of the fourth quarter of 2012, the Wells Fargo retail-bank household cross-sell was 6.05 products per household, which was up from 5.93 a year earlier.
Wells Fargo management believes that they can increase this number to 8.0 per household, which is approximately half of their estimated potential demand for an average U.S. household. Sanford and Bernstein also state that at the end of the fourth quarter 2012, one in four households had eight or more products per household.
Some investors have been focused on WFC's reduction in net interest margin (NIM) and are expressing concern over the fact that it declined by 71 basis points from the first quarter 2010 through the fourth quarter 2012. A 71-basis-point reduction in NIM is significant, but this figure was negatively impacted because the bank enjoyed $172 billion in new deposits over that same period of time.
Understanding that management's focus is on cross-selling financial products and services, it becomes clear that the new deposits of $172 billion will create an enormous opportunity for growth in lending and fee generation, and possibly the NIM reduction is temporary. We could see more NIM reduction in the short-term, because it appears that the new bank deposits will keep coming.
According to a recent study by Sanford C. Bernstein, Wells Fargo is seeing enormous deposit growth in the northern plains states, which is a key area of the emerging U.S. energy boom. According to the rtls, business customers in that region are flooding the banks with new cash, and WFC had the most deposits in all five states.
Wells Fargo’s management team does not manage to NIM, but is more focused on net-interest income. Additionally, WFC has a balanced business model, with revenue diversification from their various lending activities across consumer and commercial customers, and by non-lending activities such as banking fees, trust and investment services fees, card fees and insurance.
During this period of time, when NIM was dropping, Wells Fargo still posted record earnings-per-share growth, which speaks to how important their revenue diversity is to the bottom line. In fact, WFC has recorded 12 consecutive quarters of EPS growth, including seven quarters of record EPS growth, all during a tough period of time that included substantial regulatory change, declining interest rates, uneven economic growth and European and Asian economic challenges.
Cross-selling has also led to a much higher ratio of products per customer, with a much longer tenure, as compared to other similar banks.
As an investor, we search for management teams that demonstrate concern for their shareholders, by being good stewards of our money. Wells Fargo continues to be shareholder focused, illustrated by their continued desire to return capital to shareholders through the payment of dividends and repurchase of shares and/or smart acquisitions.
Last season's Champions League winners went in front when Branislav Ivanovic - victim of Luis Suarez's bite - won a header which went in off Victor Moses, who claimed his third goal in as many Europa League games.
The visitors should have scored again prior to Fernando Torres striking the post before Cesar Azpilicueta was adjudged to have fouled Valentin Stocker and Fabian Schar converted an 87th-minute penalty. However, Chelsea responded and Luiz's late intervention earned the advantage ahead of next week's return at Stamford Bridge.
Chelsea, who had lost four of their five prior European away games, missed numerous chances and Luiz's shot skipped around the wall and inside the post after John Terry had been denied by goalkeeper Yann Sommer's point-blank save earlier in stoppage time.
Chelsea, playing in white, had to be patient as Basle started well before Azpilicueta raced down the right and crossed to the near post, where Lampard's prod towards goal was turned away for a corner by Sommer. Lampard's set-piece was met by Ivanovic, whose header deflected off Moses and bounced inside the far post.
Eden Hazard, playing centrally behind Torres, was doing his utmost to find openings in the Basle defence, but all too frequently Chelsea gave the ball away. Torres twice had half-chances before Lampard found Ramires and the Brazilian's dipping shot from the right was saved well by Sommer.
Much of the second half was disjointed and punctuated by mistakes as Chelsea were forced to repel repeated Basle attacks. Fabian Frei shot narrowly wide from the edge of the box and Cole received a yellow card for time wasting at a throw-in before Aleksandar Dragovic was booked for a sliding challenge on Torres, meaning the defender will now miss the second leg.
Hazard made way for Juan Mata and Lampard was replaced by Oscar as Chelsea's search for a second continued to prove elusive. Basle substitute Marcelo Diaz curled an effort narrowly wide and Cech collected at the feet of Mohamed Salah after the winger had been played in by Dragovic. But Chelsea found themselves level when Azpilicueta was ruled to have hauled down Stocker in the area and Schar sent the ball down the middle of Cech's goal.
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