Wells Fargo Bank has been hit by the consequences of recession, and the delinquency level for its holdings reached 40 percent. The value of the company’s property and investments has decreased, and although many banks face similar problems at the moment, the management needs to find a suitable strategy to create a competitive advantage, attract good customers, eliminate bad debt and secure investments for the future. The below study would look at different aspects of the strategic plan, to create a fully functional outline of the management issues.
The future of Wells Fargo
The case study reveals that the company’s credit rating in 2009 was weakened by the last merger; according to Jo et al. (2010), the company lost 2.4 billion dollars in the last quarter of 2008. Although the company has expected a decline in share prices, they could not predict that the house prices would fall further. Therefore, the recommendations of the study would include re-branding the Wachovia Bank, sell bad debt and move towards international business investment banking. As the personal finance market has not stabilized, and there is a large competition in the 40 states the company is present, there is a need for specialization; providing merger advice, business financial and investment services, as well as creating joint ventures for trading internationally. This move would help the Wells Fargo Bank to increase its reputation, provide healthier balance sheets and regain its market position, while expanding internationally.
Projected financial statements
Financing of acquisitions/growth
The financing of acquisition would be supported by savings made by the automated, safe Internet operation. As the liabilities that came with the last acquisition have increased workforce, process improvement needs to be carried out to reduce the cost of operations, therefore, increase the net income and profits.
Raising capital and debt
Diluting the ownership of FWC would be providing enough assets for the bank to make the necessary improvements, change the profile of the company from mortgage lending to investment banking, advice and savings, which would not be as profitable short term as lending, however, it would provide more securities for stakeholders and increase the asset of the company. Raising capital through increasing equity, issuing new stocks and increasing investments would be good methods to follow, according to Zhou, (2011)
Strengthening market position
In order to strengthen its market position, the Wells Fargo Bank needs to re-position its different services and create an image that would attract both high profile private and business investors, looking for financial services. The consolidation of mortgage debt would be the most challenging task during the year; however, with securing more investments, issuing further securities during the year, the goals set in the projected balance sheet could be achieved. International expansion with reduced number of offices, but safe online services, such as offshore and international banking or investment portfolio management can be achieved at a considerably low investment budget.
Management strategies for the years ahead for Wells Fargo
Because of the number of mergers during the past decades the company has gone through, it is important to focus on a shared common vision as a company, taking into consideration stakeholders’ interest. Evaluating the market, needs, competition and current products would be the start of a long term project to create a strong company with a healthy balance sheet and high standard international financial products and services. This would involve investments into IT, but the company already has human assets to use. (Skills Measurement Report)
Zhou, Q. (2011) Applied Economics, Business and Development: International Symposium, ISAEBD 2011, Dalian, China, August 6-7 pp. 203-210
Jo, H., Durairaj, V., Driscoll, T., Enomoto, A., Ku, J. (2011) Bank mergers: Bank of America-Merrill Lynch vs. Wells FargoWachovia acquisitions. In: Journal of Case Research in Business and Economics. Online. http://www.aabri.com/manuscripts/10497.pdf
Dlabay, L., Burrow, J. (2007) Business Finance. Pp. 233-240.
Skills Measurement Report. Maintaining Talent for Market Leadership—How Wells Fargo
Keeps Top IT Performers On Board and Moving Ahead (November 2002) Online. http://www.brainbench.com/pdf/CS_WellsFargo.pdf