My compy is wells Fargo

Wells Fargo

Name

Institution

Introduction

Wells Fargo is an American multinational as well as a fiscal services holding entity with its headquarter at San Francisco, California. Wells Fargo has the largest market value in the world, fourth biggest banking institution in the U.S in terms of assets and the bank by market capitalization (Alvarez, 2010). It is the second largest banking institution in terms of deposits, debit cards and home mortgage servicing.

Wells Fargo has its operations spread over about 35 nations and has over seventy million customers in the world. In the year 2012, the company had an estimate of about nine thousand retail branches and about twelve thousand automated teller machines in thirty-nine states and districts of Columbia. In the month of July this year, the company got the position of the largest banking institution on the basis of market capitalization (Yeyati & Micco, 2007).

Economic and social factors impacting the performance of wells Fargo

There are several factors that affect the performance of Wells Fargo as a banking institution. These factors may be either economic or even social and are either caused them the bank or the customers served by the bank (Alvarez, 2010). Some of the factors responsible for the alteration of the banks performance include the capital adequacy of the bank, management efficiency and asset quality (Yeyati & Micco, 2007).

Capital adequacy

In the banking industry, the capital sufficiency of the bank is a key element that influences the profitability of the bank. The capital available refers to the amount of banks finances that are available and in a position to hold its business and act as a back up in time of adverse circumstances. Banks capital generally creates liquidity for the bank for the facts that deposits made to the bank are in most cases fragile and prone to runs in the bank. Greater bank capital reduces the likelihood of worry to the management of the bank (Alvarez, 2010). In this case, as a result of Wells Fargo opening a large number of branches over the world, its capital base has been distributed to these branches making it to be prone to risks arising from capital adequacy. Capital adequacy in most cases displays the internal strength of the bank and its capability to withstand losses during crisis. As such, these many branches may lead to weakening of the banks capital bases exposing it to more risks.

Asset quality

The banks asset quality is also another factor that affects the prosperity of the bank. It includes the current assets of the bank, the credit assortment, the banks fixed asset as well as other investments done by the bank (Alvarez, 2010). As a result of its expansion, Wells Fargo may offer lots of loans to its clients thus increasing the risk of the bank through the losses that may arise from delinquent loans. In one-way or the other, this will affect the operations of the bank.

Management efficiency

One of the key internal factors of the bank that affects its profitability is management efficiency. It is always represented by varied financial ratios like total asset growth, the growth of the banks loan rate and the earnings growth rate (Yeyati & Micco, 2007). Again, the operational efficiencies in managing the operating expenses of the bank are another dimension of management quality. Management efficiency is in most cases qualitatively expressed via subjective evaluation of the system of management, the discipline of the organization, control systems and quality staff. As such, the massive expansion of Wells Fargo has seen it have an increase in the demand for employees all over the world that has led to decreased efficiency in management in some of the banks branches.

Amongst these factors, capital adequacy and management efficiency are very critical in the operations of a bank and they need to be keenly looked at. The reason behind this decision is because, the banks capital adequacy dictates the operations of the bank in all its branches and the management of the bank determines to a large extent the success of the banks operations (Yeyati & Micco, 2007).

Actions to overcome the factors

To make sure that the banks acts accordingly and with minimal chances of having any losses, it is advisable to employ the most qualified staff for the bank to manage all its management activities. Again, training the staff on the operations of the bank before engaging them fully into the operations is another strategy of overcoming the factor of management efficiency (Yeyati & Micco, 2007). Again, the bank may make sure that the quality of its assets all over its operating branches are kept at check by looking at the credit portfolio of the bank and maintaining its interest rates on loans. The act will make sure that capital available for the bank is stabilized and that the bank will operate at profits rather than on losses. Finally, increasing the capital base of the bank will solve the capital adequacy factor of the bank and stabilize its operations.

Conclusion

To conclude, the paper has discussed more about Wells Fargo and the factors that affect the performance of the bank. These factors come from within and without the organization and may be solved for the betterment of the banks performance. Based on the argument, the performance of the bank is not at stake but its expansion may completely lead to its operations being altered all over the world. Therefore, the banks needs to come up with the appropriate strategies to assist cater for these factors that will automatically lead to better performance.

References

Alvarez, S. G. (2010). The acquisition of Wachovia Corporation by Wells Fargo & Company: testimony before the Financial Crisis Inquiry Commission, September 1, 2010.

Yeyati, E. L., & Micco, A. (2007). Concentration and foreign penetration in Latin American banking sectors: Impact on competition and risk. Journal of Banking & Finance. doi:10.1016/j.jbankfin.2006.11.003