Wells Fargo 4Q and full year numbers

Wells Fargo reported numbers last Friday, before the bell, in amongst all the bedlam (strictly speaking that word is derogatory) we have pushed the results reporting (from our side) a little out. I read their now old 2014 annual report and then their Full year and fourth quarter numbers yesterday in more detail. At face value the numbers I guess are uninspiring, for the full year for 2015 earnings and revenues grew by very low single digits, barely at all.

It was however not a bad year for shareholders however, 12.6 billion Dollars was returned over the course of the year through share buybacks and dividends. With a market capitalisation of 246 billion Dollars, that is around five percent. The yield at current levels (hopping around a little, apologies) is 3.13 percent before tax and on the full year earnings per share is 11.55 times. I guess the share price reflects exactly that, muted growth over the last year and a tough year with regards to growth prospects. And as such prices the stock accordingly.

A strange metamorphosis of a company from being the transporter of goods and people via stagecoach, now you know where the logo comes from, the name comes courtesy of the founders, Henry Wells and William Fargo. Believe it or not, those same two fellows, Fargo and Wells, teamed up with a John Butterfield to found American Express. A mailing company, located in New York. In the lead into the financial crisis the company was the only business with a triple A credit rating. This company is good enough for Buffett, it is one of the big four holdings of Berkshire Hathaway. American Express is too, perhaps Buffett knows his history better than most, perhaps it is just a coincidence.

So why hold this business? If you read through the results you get the sense that this is a business that operates along the lines of good old fashioned banking, offering the services that their clients have always been used to. In a sense mom and pop style banking. The investment is based on the premise that the US economy will continue to be strong, and that their core business will grow with the continued recovery. Whilst rates pick up, their net interest income will too, and having worked hard at keeping costs low and business simple. We continue to recommend the company and in particular find them attractive at these deflated levels.