Wells Fargo Going Global, Finally

by Trefis Team
+4.75%
Upside
51.57
Market
54.02
Trefis
WFC
Wells Fargo & Co.
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Wells Fargo (NYSE:WFC), the bank with the largest market capitalization in the U.S., has laid out plans to expand its global footprint. [1] The bank, which has historically been almost exclusively focused on U.S. operations, wants to leverage its stable domestic business and extend corporate banking services to 20 other countries. Wells Fargo has already been enhancing its service portfolio in recent months with the acquisitions of Burdale Financial Holdings Limited and EverKey Global Partners (see Wells Fargo’s on a Shopping Spree, Picks up Burdale from Bank of Ireland). Geographical diversification comes as the logical next step for the bank, which reported record figures for 2011 even as many competitors put up weak numbers in the challenging period. And with players like Bank of America (NYSE:BAC) and Citigroup (NYSE:C) cutting back on their ambitious global expansion plans, the time looks right for Wells Fargo to step in.

We maintain a $30 price estimate for Wells Fargo’s stock, which is about in line with current market price.

See our complete analysis of Wells Fargo here

Wells Fargo has shortlisted 20 developed and promising countries where it intends to start full corporate banking services. Prominent locations in the list are the U.K., Germany, the Netherlands, France, China, Hong Kong, Australia, Japan, India, South Korea and Singapore. [1]

As of now, foreign loans form a very small part of Wells Fargo’s business. All of its foreign loans are handed out for commercial purposes. They make up about 11% of its total commercial lending portfolio, and less than 5% of its total outstanding loans. Our analysis of Wells Fargo shows that foreign loans are the smallest contributor to its value – as shown in the chart above – constituting less than 1% of our estimated value for the bank. There clearly is ample room for growth in this area, and this global expansion is definitely a step in the right direction

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Notes:
  1. Wells Fargo plans global expansion drive, Financial Times, Mar 4 2012 [] []
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