In an investors’ conference last week, Wells Fargo & Co. (WFC) disclosed that it is aiming for a 10% growth in revenues per annum. The investors’ conference of Wells Fargo which happened for the first time in the last 12 years saw the management detailing the company’s past performances and future opportunities.
Wells Fargo’s 10% per annum revenue growth expectation is based on its cross-selling strategy. The company plans to achieve this growth by applying its legacy Wells Fargo cross-selling model to the Wachovia customer base.
Wells Fargo’s wealth business also aims to increase its share in the company’s total revenue. This division, which now accounts for around 14% of the company’s total revenue, plans to boost the contribution to the range of around 20% to 25%, with an increase in client assets by 20% to $1.5 trillion in the next three years.
The integration of merged Wachovia remained on track and is expected to realize $5 billion of annual merger-related savings upon completion of the integration process in 2011. The company has achieved 70% of this targeted consolidated run-rate savings. Wells Fargo expects the balance to be in a run rate by the middle to the latter part of 2011, when it finishes converting the remaining Wachovia stores in the East.
Though the company is on track with its loan modification programs and the Wachovia merger, the combined entity’s large exposure to mortgage/real estate loans and the integration costs associated with the merger will continue to impact its earnings throughout 2010. However, its disciplined lending approach has prevented Wells Fargo from suffering as much from the current mortgage crisis as some of its peers.
Although there is lot of uncertainty regarding the commercial sector, especially due to the credit crunch and regulatory and fiscal policy issues in the near term, we believe that Wells Fargo’s cross-selling ability, the strategic Wachovia cost-integration and a diverse business portfolio along with better-than-expected growth in investment banking will drive long-term growth and boost investors’ confidence.
Read the full analyst report on “WFC”
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