Wells Fargo – Standing apart
One branch of banking that was hit hard for creating the world’s financial mess was investment banking. Pink slips have been common in the sector during last five years, but things are starting to look up. Profitability is back and banks are taking extra care in their actions.
One bank which performed very well since the crash of 2008 is Wells Fargo & Co (NYSE:WFC). Initially, it too faced the crisis heat but easily made it through the situation without much difficulty. The bank grew tremendously in the last decade, and actually bounced back stronger after the crisis. The bank’s stock price has appreciated by 30% in last year. As a matter of fact, the company’s assets have increased by four times in the last decade from a mere $400 million to roughly around $1.6 trillion.
The bank, which has its existence since 1852, acquired Wachovia in 2008 for $23.1 billion; this was hardly a penny of valuation due to non-performing mortgage loans. Since then, the deal has added about $700 billion assets to the balance sheet and made the bank the fourth largest in the nation.
The operation of the bank has continuously evolved over this period of time, though the rising interest rate environment had put some pressure on the perimeter. The company has been posting excellent numbers from for the past year, making it look like a good bet in the near future.
Riskier options
Aggressive investors who are willing to take more risks can opt for JPMorgan Chase & Co. (NYSE:JPM) and Citigroup Inc (NYSE:C). Though both the companies had their own sets of problems after the financial crisis, both of them have been posting good numbers in the past few quarters.
JPMorgan Chase & Co. (NYSE:JPM) has been caught up in various scams, with the most recent being a commodity scam for which it is expected to pay $600 million in penalties. The company is alleged with fraud to its customers in energy markets in California and Michigan. This is not the first time that the bank has faced this kind of trouble, and the company’s history is still haunting the its performance.
JPMorgan Chase & Co. (NYSE:JPM) is trading near to its all-time high of $60 per share, showing that the company has been able to completely come out of the financial crisis. Scam issues still are hurting the company’s stock price, however.
Citigroup Inc (NYSE:C) was another bank which was badly hurt in 2008 and was rescued by the U.S. Government. $25 billion in aid was paid to the bank, and another $25 billion was invested afterward along with guarantees for risky assets amounting to $306 billion; the bank has since paid the entire outstanding loan given by the government. The bank’s recent quarterly results have not shown any kind of improvement, however, and that is the reason that investors are staying away from this stock. Another reason is the company’s price-to-earnings ratio of 16.93, showing that the stock is slightly overvalued.
Takeaway
It’s a hard fact that things went haywire in 2008 and the effects of the mess can still be seen in places. Many countries that had investments in the U.S. banking system are still going through a rough patch. Some banks are doing well while others are still struggling to get by. Recovery is slow, but it is coming. It’s a perfect time to invest in banks like Wells Fargo & Co (NYSE:WFC) that have been doing well for the past few quarters.
The article It Is the Right Time to Scrutinize the Financial Sector? originally appeared on Fool.com and is written by quratulain kamila.
quratulain kamila has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Citigroup Inc (NYSE:C) , JPMorgan Chase & Co (NYSE:JPM)., and Wells Fargo. quratulain is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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