Wells Fargo (NYSE:WFC) is the second largest bank in the U.S. by market capitalization and competes with other prominent firms like Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM), and Citigroup (NYSE:C) among others. Below we look at three key business divisions that drive Wells Fargo’s stock value.
Our price estimate for Wells Fargo stock stands at $32.18, which is about 10-15% above market price.
- How Much In Outstanding Mortgage Loans Did The Largest U.S. Banks Service As Of Q2?
- How Have Third-Party Mortgage Servicing Portfolios For The Largest U.S. Banks Changed In The Last 5 Quarters?
- Wells Fargo’s Sales Scandal Is A Bad Look, But Bank Is Well-Positioned Going Forward
- How Have Card Charge-Off Rates For The Largest U.S. Card Issuers Changed In The Last 5 Quarters?
- What Are The Card Charge-Off Rates For The Largest U.S. Card Issuers?
- How Has The Total Loan Portfolio For The U.S. Banking Industry Changed Over The Last 5 Quarters?
The 3 Most Important Business Divisions for Wells Fargo
1) Mortgages – 29% of the company’s stock value
The mortgage business of Wells Fargo includes home mortgage loans, mortgage servicing business and mortgages held for sale. Wells Fargo is the largest originator of mortgage loans in the U.S. with originations of $386 billion in 2010. It is also the 2nd largest servicer (processes monthly payments of mortgage loans) of mortgages in the U.S. with rights for servicing $1.8 trillion of mortgages for its clients.
Wells Fargo’s mortgage business earns interest in the form of monthly payments on home loans, servicing fees on mortgage serviced for clients, interest on mortgages held for sale and gains upon their sale.
2) Asset Management & Brokerage – 19% of the company’s stock value
Wells Fargo’s earns non-interest income by providing asset management, investment, retirement and brokerage services to clients in the U.S. Its clients span households, small, medium and large businesses, governments, institutional investors and individual investors.
With close to 1,300 Wells Fargo Advisors offices nationwide, Wells Fargo meets brokerage need of close to six million households. It also provides brokerage service through many of its banking stores and other channels.
3) Securities & Trading – 18% of the company’s stock value
Wells Fargo, through its security & trading division, trades corporate debt, U.S. government agency obligations and other securities acquired for the purpose of short-term appreciation. It also engages in derivatives trading.
The company also holds debt securities, including mortgage backed securities and marketable equity securities for investment purposes. It also invests in non-marketable securities like venture capital equity.