Well Fargo is one of the largest banks in the United States with close to 9000 branches spread across the country. Corporate banking is the main business that the bank engages in, with community banking as its focus. Considering the financial performance of the company, this paper determines whether the company is worthy of investment by potential investors. If this is the case, the paper will also explore a funding request for the company based on equity.
The company has experienced generally a high operating margin holding over 35% over the last ten years, showing high prospects of profit in normal operations. Although return on equity has been decreasing, it has maintained in a percentage of the ten per cent mark over the last five years (Financial Morning Star, 2017). Additionally, the company is running debt-free, as it does not have interest coverage figures. It also maintains a healthy debt-equity ratio of just between 0.8 and 1.5, thereby assuring the potential investor of financial stability during its operations (Financial Morning Star, 2017). Moreover, the company has the lowest figures for asset turnover, with figures ranging from 0.05 to 0.06 (Financial Morning Star, 2017). Over a five- and ten-year average, the company has experienced growth in revenue, net income and operating income, thereby showing that it is a favorable company to invest in (Financial Morning Star, 2017). As a result, it would be recommended that any potential investor should invest in this company, as it has proven satisfactory efficiency, profitability and opportunity for the investor.
Delegate your assignment to our experts and they will do the rest.
Funding Request
Wells Fargo is an organization in the banking sector in the United States, concerned with community banking. In recent years, community banking has seen rising customer needs across the country. Wells Fargo has seen this as an expansion opportunity to reach to Americans in the ten states, which the bank has not yet explored.
As a result, the bank is in need of $100 million dollars to boost expansion into unexplored American territory and engage the rest of the American population. This funding is expected to come from equity, by offering stock to members of the public at an offer price. The fund drive is expected to raise $30 million in the first year and $17.5 million in the subsequent four years. These funds will be used as start-up expenses for the establishment of new branches across the country. The expected number of branches is set to be at two hundred branches progressively over the five-year period. This puts our projected branch numbers at 9000 across all fifty states in the country by the year 2023.
Start-up expenses for the new branches will be required for the acquisition of assets such as property, banking halls and operations for the first two years of set-up. After that, the branch’s operations are expected to be independently financed bearing in mind the return on equity and operating margins that are enjoyed across the branches. This heavy investment in the company is supported by the fact that the company has had a good record of accomplishment over the past five and ten year periods, boosting investor confidence in the operations of the bank. As a result, strategic moves within the next years are not anticipated, except by means of acquisitions for community banks operating within the expansion area. These will, however, be covered by the funding request.
In conclusion, Wells Fargo, being an aspiring national leader in community banking, wishes to enlarge its territory to cover all fifty states in the country. Having shown its fiscal track record over the past five years and shown its potential for investors, the company has submitted its funding request of $100 million over the next five years to cater for its start-up expenses in two hundred new branches in ten states.
References
Financial Morning Star. (2017). Wells Fargo & Co Financials . Retrieved from Financial Morning Star: http://financials.morningstar.com/ratios/r.html?t=WFC
