Swot analysis of Wells Fargo. Wells Fargo & Company is a financial service-providing US multinational company. William Fargo and Henry Wells were the founders of the financial institution, and they laid the foundation of Wells Fargo in 1929. Initially, it started under the name of Northwest Bancorporation, Northwest Corporation in 1983, and finally, it became Wells Fargo Company in 1998. The headquarters of the company is in San Francisco, California, and New York, USA.
Wells Fargo’s main products and services are;
- Benefits & Rewards,
- Wealth Management,
- Retirement Plans,
- Merchant Services,
- Online Banking Services,
- Credit Facilities,
- Corporate Banking,
- Commercial Banking,
- Retail Banking,
According to an estimate, the annual revenue of Wells Fargo in 2022 was 82.859 billion dollars, and it has decreased by 0.55%. Out of which, the net income of the company was 12.067 billion dollars, and it has declined by 40.42%. However, the company has employed roundabout 238,000 employees to manage its worldwide operations.
Wells Fargo’s top competitors are;
- US Bank,
- Morgan Stanley,
- Goldman Sachs,
- Bank of America,
- JPMorgan Chase,
- ING Group,
- Prudential Financial.
Today, we’ll discuss the swot analysis of Wells Fargo. It’s going to analyze the internal and external factors impacting the world’s leading financial institutions. Here’s the swot analysis of Wells Fargo as follows;
Strengths of Wells Fargo
Wells Fargo is the world’s leading bank and it’s the US’s fourth-largest bank in terms of assets. However, the company ranked at the 30th position of the world’s largest corporations in the Fortune 500 list in 2020. The bank also achieved the highest rating for lending in the community.
According to an estimate, the net worth or market capital of Wells Fargo in April 2023 was 142.62 billion dollars. However, it ranks at the 98th position of World’s Best Banks in 2021 and 72nd position in Just Companies 2021 according to the ranking Forbes.
Wells Fargo offers various types of services in order to cater to the needs of a wide range of people in the market. The bank operates in three major categories personal, small industries, and corporate comprising services like investing, online banking services, merchant services, insurance, loan, banking, and many others.
Market Leader in SME
Small and Medium Enterprise is one of the major markets of Wells Fargo consisting of diverse economies ranging from Europe, America, and Africa to Asia. The influence of Wells Fargo provides the company great access to the vast financial resources of the SME industry in and out of the US.
Wells Fargo falls under the category of the big four financial institutions that are dominating the US banking industry. Citibank, Bank of America, and JPMorgan Chase & Co are the other banks of the big four. They have a significant influence over the government policies makings.
Strong Financial Position
The pandemic crisis has slightly dropped the annual revenue and net income of the company. Other than that, Wells Fargo still holds great resources to launch various types of new projects.
Wells Fargo is a global multinational brand and the company is operating in more than 35 countries across Asia, Africa, Europe, and America. The financial institution has gathered a plethora of customers across the world over the years.
Weaknesses of Wells Fargo
Wells Fargo has faced many lawsuits and the company ended up paying billions of dollars of heavy fines and settlement money. Many critics say that they’re the self-inflicted wounds of the company. However, they’ve increased the operational cost of the bank and greatly impacted its profitability.
Negative Brand Image
Wells Fargo has a large database of loyal customers. Even the loyal customers would leave the bank when they find out their bank is exploiting the relief aid to earn profit during the pandemic crisis. However, the bank is doing a lot of efforts to regain the trust of customers in order to stop them from migrating to competitors.
Fake Accounts Scandal
Wells Fargo’s employees opened up fake accounts of millions of customers without getting their permission in order to reach the sale target in 2016. The bank had no choice but to pay a 3 billion dollar settlement fee.
Wells Fargo follows an antique banking system and the bank is struggling to change. The bank regulating authorities aren’t satisfied with it. Most importantly, the old aging system is hampering the company’s daily operation and making it inconvenient for the customers.
Federal Reserve started capping the total number of loans that the bank could give out as a punishment to Wells Fargo’s fake account scandal. However, the company quickly reached its limits while distributing PPP (Paycheck Protection Program), because its clients were missing out on billions of dollars. Resultantly, the company lost a lot of opportunities of not lending out more loans to potential clients.
Opportunities available to Wells Fargo
Expansion into Smaller Towns
Wells Fargo usually has offices in big cities. Now the company should change its focus to the smaller markets, and start providing services in the smaller towns. It would help the financial company to grow its customer market.
Financial institution usually deals with highly volatile liquid assets and it makes the banks vulnerable to a lot of external factors. Most importantly, the threat of bankruptcy is much higher in the banking industry. Therefore, Wells Fargo should diversify its resources in the stable growing industry to protect its interests.
As we know that Wells Fargo has established 13 locations offices across Europe, the Middle East, and Africa (EMEA). The bank doesn’t provide small businesses and retail banking services outside the US. Now, the company should expand its service operation in the Asian and African countries to exploit the increasing growth of emerging markets.
Wells Fargo has established a reputation of being market-leading in the SME lending industry. Now, the company should expand its operations into C&I (commercial and industrial lending. In fact, the financial institution used to be the largest C&I lender. Ever since the company lost its customer market share to the competitors, the brand never tried it again.
Threats Wells Fargo has to face
Bank of America and JPMorgan are the top main competitor of Wells Fargo in the C&I lending industry. However, the retail and SME banking industry has also become very competitive in recent years. The growing strength of competitors poses a severe threat to the company.
The Government banking regulating authorities is thoroughly investigating Wells Fargo on the charges of malpractice. It claimed that the company distributed limited government PPP (paycheck protection programs) than required. That’s why they’re thoroughly investigating and scrutinizing all the operations of the company.
According to an estimate, the pandemic crisis and worldwide lockdown have dropped Wells Fargo’s annual revenue and net income by 20.53% and 51.65%. The shutdown of small businesses led them to bankruptcy and they couldn’t pay their loans. In other words, it means the most loss to the company.
The lawsuits, scandals, and investigations have tarnished Wells Fargo’s reputation and public image to a great extent. It would take a lot of time and effort for the company to recover its image.
Millions of people across the world have lost their jobs during the pandemic. They’re now consuming their savings to survive. It means lower deposits of Wells Fargo, and it’s not good for the company’s profitability.
Conclusion: Wells Fargo Swot Analysis
After an in-depth study of the swot analysis of Wells Fargo, we’ve concluded that Wells Fargo is indeed the world’s leading financial institution. The economic recession, lawsuits, increasing costs, negative public image, and scandals are some of the main challenges. Wells Fargo should expand its market and portfolio and avoid costly lawsuits.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.