The analysis of Wells Fargo’s balance sheet passive part

Производственная практика (практика по получению

Профессиональных умений и опыта профессиональной деятельности) (Traineeship)

ОТЧЕТ О ПРОХОЖДЕНИИ

студента магистратуры группы МБФ-15 Мантатовой А. В.

Фамилия И.О.

Руководитель(-и) практики

от университета Татарникова А.Е.

Иркутск, 2017

TABLE OF CONTENTS

INTRODUCTION.. 3

1. THE ANALYSIS OF WELLS FARGO’S BALANCE SHEET.. 4

1.1. The analysis of Wells Fargo’s balance sheet passive part 4

1.2. The analysis of Wells Fargo’s balance sheet active part 6

2. THE ANALYSIS OF WELLS FARGO INCOME STATEMENT.. 9

CONCLUSION.. 15

BIBLIOGRAPHY.. 17

INTRODUCTION

A key information tool for bank analysis is the financial statement, which is comprised of the balance sheet and the statement of income. The balance sheet is a statement of a company’s assets and liabilities as determined by accounting rules. It is a snapshot of a particular point in time, and so by the time it is produced it is already out of date. However, it is an important information statement. The balance sheet of a retail or commercial bank will differ from that of an investment bank in the relative importance of their various business lines.

The income statement for a bank records all the income, and losses, during a specified period of time. A bank income statement will show revenues that can be accounted for as either interest income fees and commissions, and trading income. The precise mix of these sources will reflect the type of banking institution and the business lines it operates in. Revenue is offset by operating (non-interest) expenses, loan loss provisions, trading losses and tax expense. A more traditional commercial bank will have a much higher dependence on interest revenues than an investment bank that engages in large-scale wholesale capital market business.

The purpose of this work is to analyze Wells Fargo’s performance using its consolidated balance sheet and consolidated statement of income. This analysis would show whether it is a difference between financial statements of banks in the Russian Federation and in the United States of America.

Objectives are:

1. To analyze Wells Fargo’s balance sheet;

2. To analyze Wells Fargo’s statement of income;

THE ANALYSIS OF WELLS FARGO’S BALANCE SHEET

The analysis of Wells Fargo’s balance sheet passive part

Wells Fargo & Company is an American multinational banking and financial services holding company headquartered in San Francisco, California. It is the third largest bank in the U.S. by assets and the largest bank by the market capitalization [4]. Wells Fargo became the third-largest U.S. bank by assets at the end of 2015. Structure of Wells Fargo’s liabilities is shown in table 1.1.

Table 1.1

Structure of Total Liabilities of Wells Fargo

Source: it is calculated according to annual report of Wells Fargo [3].

The overall amount of liabilities of Wells Fargo grew 11% in 2015 and this growth was influenced by the increase of all items of liabilities. The biggest part of liabilities of the bank consists of interest-bearing deposits and noninterest bearing deposits (56% and 21%). Interest-bearing deposits as a rule are term deposits, so it is a stable source of financing, because the bank can predict when clients would like to withdraw their money. It should be mentioned that Wells Fargo used more long-term debt in 2015 than in 2014.

Structure of Wells Fargo’s liabilities is shown in table 1.2.

Table 1.2

Structure of Total Equity of Wells Fargo

Source: it is calculated according to annual report of Wells Fargo [3].

The amount of total equity of Wells Fargo increased 8% in 2015. It was influenced mostly by the growth of retained earnings in 16% and preferred stock in 18%. Retained earnings forms 58% of the bank’s total equity, it’s the biggest part of equity. 33% of total equity consists of additional paid in capital. The bank increases its capital with help of rise of retained earnings. This is a qualitative source of growth of bank capital.

Structure of Wells Fargo’s total liabilities and equity is shown in table 1.3.

Table 1.3

Structure of Total Liabilities and Equity of Wells Fargo

Table 1.3 continuation

Source: it is calculated according to annual report of Wells Fargo [3].

Total equity and liabilities of Wells Fargo rose 11% in 2015. It was influenced mostly by the growth of bank’s total liabilities rather than total equity. Total liabilities forms 89% of total equity and liabilities of Wells Fargo and grew faster than bank’s total equity. Total equity of the bank covers about 12% of Wells Fargo’s total liabilities, so the bank has sufficient amount of capital.

Wells Fargo’s return on equity is shown in table 1.4.

Table 1.4

Return on equity of Wells Fargo

Source: it is calculated according to annual report of Wells Fargo [3].

Bank’s return on equity dropped 3% in 2015 because amount of total equity increased faster than its net income in 2015.