You would think that in the midst of the economy being a bit down, a potentially too-big-to-fail institution like Wells Fargo (WFC) would be down on its luck and trying to recuperate. However, that does not seem to be the case here.
If anything, its profits have risen to record highs. This can most probably be attributed to its continued dominance over the mortgage lending market - this is a direct result of its having taken over the market as its biggest rival, the Bank of America (BAC) pulled back from the whole debacle. This is probably a testament to its discipline as it "pulled back while others hit the accelerator on subprime so now they are able to take advantage" as one expert says.
This unbridled dominance in the lending market and rise in profits, in what is still considered to be a bad year for big financial banks, seems to be a really good indicator that this company is only on the way up and there is no stopping it.
However, if you think that the company is all about money, then you are going to be surprised to find out that it actually won an award for its help in the local communities. In what is most likely one of the best PR moves made by an investment bank, considered by many to be the super villains of the world right now because of the lending crisis, Wells Fargo has shown its eagerness to assist nonprofit organizations and volunteer for these organizations as well.
The same can't be said of industry rivals. Aforementioned Bank of America is facing its own crisis, with people protesting outside its shareholders meeting. This is a reflection of how hard the crisis has hit the bank and if anything, is an indication that people are not all that happy with how this particular bank is performing. In fact, the situation is so bad for Bank of America that it has been made to pay out a $315 million settlement to a Mississippi pension fund for reporting misleading information . This is not at all good news for this company, but any bad news for its rivals is only good news for Wells Fargo.
If you think that Bank of America is the only one reeling, then you probably haven't heard of what JP Morgan Chase (JPM) just went through. It is now claiming an obscenely large loss on a portfolio that is supposed to hedge risks. The senselessness is apparent, as is the storm brewing over JPMorgan's head from investors, media, and the public alike.
There seems to be some concern, though, on the stricter rules that the government is about to apply to the industry as a whole, but, Wells Fargo's CFO believes that it will be the better for it, not like the other two rivals that were mentioned already above. The regulations will give it a "competitive advantage" so to speak.
If you keep looking around for other industry leaders that are doing at least half as well as WFC, then you probably aren't going to find it in Citigroup (C). It is still trying to settle its own issues on pay with top executives. A company that is in that kind of situation is in no position to compete - it is far too complicated at the top when executives don't know if they're getting $1 million or $10 million the next paycheck.
Another name that might pop up, but will clearly disappoint is Deutsche Bank (DB). It might be doing well, but admitting mortgage fraud and settling in court is definitely not confidence rousing news for its investors. This is really bad for it since its opponent, in this case, is the US government, and it was "in a position to know that the operations of MortgageIT did not confirm fully" to the said government's regulations (DB bought MortgageIT and endorsed over 39,000 mortgages for it that were said to be in violation of regulations).
So you see, couple all of the bad news that is happening for Wells Fargo's main rivals with the news of its takeover of a big securities firm and an energy lending business to boost its own range of services, and you can see that Wells is one of the hottest large financials right now.
This energy lending program may actually be one of the hidden gems in Wells Fargo's arsenal. The company has committed funds and resources to push other company's in commitments to provide greener and more efficient energy. Essentially, the move will secure Wells Fargo's place among leaders in this innovative industry, and provide some stability for the company's future. If its monetary commitment can fuel the next big thing in green technology and/or energy, Wells Fargo stands to be the pocketbook behind great growth. It should benefit from sales and movement of these energy sources, which could be a dynamite spot in its investment portfolio. Monitor this action closely and hope for some breakthroughs.
This is definitely a company that seems to be on the up and up. With all of the good news headed its way and the company's executives making decisions that are smart and disciplined, with an eye on profit making still but another eye on making sure that it doesn't go for too much profit and ruin their financial fortunes at the same time, Wells is something you will definitely want to keep in your portfolio. As far as the current news goes, there's no reason to be afraid that it will suddenly submerge and fall from grace like all of its major competitors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
