Analysis Of Wells Fargo Financial Analysis

Here the selected firm is a bank and hence the conventional ratios may not hold the same significance as it does for the firms in other industries. For a bank the deposits is their liabilities and hence the loans which banks gives are their assets. Thus the bank balance sheet will consist of only the deposits and the loans. Hence the current ratio will not make the same sense as it does for other firms. The current ratio of the firm is 0.209. Since the bank does not have inventories and other short term assets, quick ratio cannot be calculated or is the same the current ratio since there are no inventories. Also the cash ratio is also the same as the current ratio for the reasons mentioned above (Wells Fargo, 2014).
Wells Fargo debt to equity

Net margin for the Citi is 17% which is less than the 26% for Wells Fargo. Also the earning per share is 4.35 which is less than the Wells Fargo. Return on equity is 7.02% is higher for Citi. Here we have analyzed the ratios of the two main competitors of Wells Fargo. Wells Fargo is ahead of its competitors in most of the ratios and is poised to become one of the largest banks.
Overall Financial Effectiveness
Wells Fargo financials are very healthy and their financial performance over the past few years have been impressive. In the year 2008 when most of the banks were suffering from aftermath of crisis, Wells Fargo was insulated from the crisis since their investments in the subprime mortgage was not significant. Thus they were the few banks who were prudent in their approach and they did not join bandwagon. Prior to the crisis many of the banks were making huge money and were getting sucked into the crisis. However the firm did not participate in the blind rush and thus were safe from the defaults of the subprime loans. Thus this shows that the management is financially prudent and are clear about their

In the year 2008 it was one of the few large banks which was unaffected by the crisis. Analysts are bullish on Wells Fargo since it has strong fundamentals and has a strong brand name. Banking depends a lot on the trust which the customer has on the bank. Wells Fargo is one of the most trusted banks because of its service and its strong customer focus. Also in the last few years it has concentrated more on its core banking solutions giving it edge over its competitors who have been struggling the aftermath of its crisis.
Also US economy has shown a strong resilience in the last few quarter and the economy is seeing signs of revival. The unemployment numbers have been promising and the Federal Reserve have started giving hints on the taking back the quantitative easing. This can also been seen in the S&P trend which has risen significantly over the past months. This is signaling the revival of the economy. As a result banks are supposed to increase as their activity will increase if the economy grows. Banks started to increase as there is more economic lending and hence the profitability of the banks