Small Things Matter
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Wells Fargo (NYSE: WFC) is the best Trade Bank in the United States of America. Such a conclusive statement is bound to stir debate. Some critics have already pushed me into the rabid incline. Newsflash, I am not a fanatic. Trade Finance magazine actually conducted an online reader’s poll that was geared towards establishing the best trade bank based on customer service and expertise. The polls revealed that Wells Fargo was indeed the best U.S trade bank.
Apparently, Wells Fargo has established a track record in bagging the best trade bank category. Last year, it did the same and now holds a two year consecutive streak. Although, this paints a picture of incredible service packages at Wells Fargo, it is not decisive. However, several of Wells Fargo's strategic initiatives should prove to be much more conclusive.
It is the small things that matter
‘It is the small things that matter.’ Whoever coined this witty adage probably didn’t know that its use would extend into the finance niche. Wells Fargo knows that in order to grow, it has to target the masses. In simple terms, it has to target the small income earners, small business owners and, by and large, the lower segments of the economy.
Wells Fargo has approved more SBA loans than any other lender in its space. SBA loans are primarily driven towards enhancing the stability of small businesses. These loans play an instrumental role in fueling growth and encouraging healthy competition. The SBA loans are offered to businesses that are wedged in upcoming industries and typically record average revenues of less than $20 million. Wells Fargo seems to have a very blissful relationship with track records. Seemingly, it also has a track record with regards to SBA loans. Last fiscal year, it was the first lender to approve more than $1 billion in SBA loans.
In my line of thought, I believe that Wells Fargo’s involvement in the lower segments of economy is one of the core driving factors behind its good performance. From the look of things, it is only logical that Wells Fargo’s lending terms are comfortable to the average Joe trying to make a business work. This gives it a big edge. Why is this so? The contemporary economic environment thrives in unpredictability. Things can change overnight. Small business owners, therefore, need comfortable lending conditions. On the flip side, Wells Fargo is also cushioned against defaults in payments as its lending conditions are somewhat fair.
In person, I also think that the $5 million partnership with United Way Worldwide will exclaim its position in the lower tiers of the economic ladder. The partnership is motivated towards extending financial counseling for Low and Moderate Income financial households. The program will extend a comprehensive approach to basic finance for LMIs. It will be conducted at the grassroots and will mainly utilize community based programs.
Talking about small things that matter, I must say that Wells Fargo’s recent move to provide a mortgage free home to a wounded Iraq veteran was commendable. Elliot John Miller, a retired navy seal and owner of the mortgage free home, was injured in multiple blasts in Iraq and is now constrained to a wheel chair. Wells Fargo didn’t just cut some ribbons in the name of helping community members, it actually went the extra mile and redesigned the house to the specific needs of Miller. In my opinion, this passes a strong message. It shows society that Wells Fargo is not only there to provide financial products, but to also support them in other affairs wherever possible.
Competitors operating on a tight corner
It would be out of order to say that competitors are not a factor to consider. Luckily for Wells Fargo, most of its key competitors are still neck deep in murky waters. JPMorgan’s (NYSE: JPM) $2billion loss still seems to be haunting the bank. If you actually key in ‘JPMorgan’ on your search bar, the probability that the first page will be flooded with information on trade losses is incredibly high. Former Federal Reserve chairman Alan Greenspan cited his unhappiness with the loss, exclaiming that the some of the ‘too big to fail’ banks were using the government as a buttress to support unproductive ventures.
Another bank that is operating on a tight corner is Bank of America (NYSE: BAC). It has to look for a new way to make up for revenue that used to be earned from underwriting and servicing home lending. Before it figures that out, Wells Fargo has already come up with a counter for its $20 billion environmental initiative. Wells Fargo has followed suit and announced a green initiative that will see the issuance of $30 billion in loans (all directed towards green initiatives).
In conclusion, I would say that Wells Fargo has the definite edge at the moment. Take advantage of the situation and buy.
muhammadbazil has no positions in the stocks mentioned above. The Motley Fool owns shares of Bank of America, JPMorgan Chase & Co., and Wells Fargo & Company and has the following options: short APR 2012 $21.00 puts on Wells Fargo & Company, short APR 2012 $29.00 calls on Wells Fargo & Company, short OCT 2012 $33.00 puts on Wells Fargo & Company, and short OCT 2012 $36.00 calls on Wells Fargo & Company. Motley Fool newsletter services recommend Wells Fargo & Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.