Wells Fargo & Company (WFC) is a huge Western and Midwestern bank that provides a diverse array of financial services to its more than 23 million customers. The company employs more than 150,000 people at its over 6,000 locations nationwide. Wells Fargo has about $500 billion in assets.
While the company continues to derive more than half its revenues from interest income (about $26 billion), its activities are not limited to collecting deposits and lending money. Wells Fargo engages in other businesses such as brokerage services, asset management, and investment banking. The company also makes venture capital investments.
Over the last ten years, Wells Fargo has averaged a 1.57% return on assets and an 18.19% return on equity.
Wells Fargo is closely associated with California in the minds of most investors. The company now operates in 23 different states. However, the concentration in California remains.
Mortgage lending in California accounts for approximately 14% of Wells Fargos total loan portfolio. Commercial real estate loans in California account for another 5% of the companys total loans. No other single state accounts for a similarly sized portion of total loans. In fact, neither mortgage lending nor commercial real estate lending in any other state accounts for more than 2% of Wells Fargos total loans.
Wells Fargos focus on cross-selling is well known. The company has a stated goal of doubling the number of products the average consumer and business customer has with Wells Fargo to eight products per customer (from the current four products per customer).
Cross-selling increases customer stickiness. It also helps increase profitability by decreasing expenses relative to revenues. The need for a large physical footprint is reduced as is the need for a large number of bankers. Instead, the existing infrastructure is able to provide additional revenue from the same customers.
Wells Fargos Chairman & CEO, Richard Kovacevich, explains the importance of the companys cross-selling in the Vision & Values section of the corporate website:
“Cross-selling or what we call needs-based selling is our most important strategy. Why? Because it is an increasing returns business model. Its like the network effect of e-commerce. It multiplies opportunities geometrically. The more you sell customers the more you know about them. The more you know about them the easier it is to sell them more products. The more products customers have with you the better value they receive and the more loyal they are. The longer they stay with you the more opportunities you have to meet even more of their financial needs. The more you sell them the higher the profit because the added cost of selling another product to an existing customer is often only about ten percent of the cost of selling that same product to a new customer. This gives usas an aggregator a significant cost advantage over one product or one channel companies. Cross-selling re-invents how financial services are aggregated and sold to customers just like other aggregators such as Wal-Mart (general merchandise), Home Depot (home improvement products) and Staples (office supplies).”