Discuss about the Citibank and Wells Fargo Financial Analysis.
It is logical to compare Wells Fargo and Citi Bank mainly because they both offer close to similar banking financial services. Citi Bank and Wells Fargo are among the best banks in US with large number of branches across the continent states. Wells Fargo employees over the three year period number has been seen to be close to constant figure of 264900 employees in 2013,264500 in 2014 and 264700 in 2015 most of which are full time equivalent employees as illustrated in link https://www.statista.com/statistics/295496/wells-fargo-full-time-employees/ . At Citibank in 2013 they had 183817,2014 it was 176417 while in 2015 it was 170413 all deemed to be full time service employees as referred in link https://www.usbanklocations.com/citibank-trend.shtml?c=numemp .Hence in terms of human resource Wells Fargo has more workers than Citibank of course as a result of 2008-2009 financial crisis effect.
Citibank had 723 branches in US refer to link https://en.wikipedia.org/wiki/Citibank while Wells Fargo by 2015 they had 8700 branches with 13000 ATMS as referred in link https://en.wikipedia.org/wiki/Wells_Fargo. Citibank and Wells Fargo are global in its performance with branches across 35countries across the world for Wells Fargo and branches in 19 states for Citibank offering commercial banking financial services as well as insurance service across globe. They both operate under timelines of 40hrs a week with the aspect of offering corporate social responsibility services to the needy in the region.
Analysis conducted using 2013,2014,2015 on efficiency of using assets to generate income for the two banks have clearly shown that in 2013 Wells Fargo utilized its assets well by 1.51% to generate revenue than Citi Bank that just utilized 0.73% for the same contribution. There is a clear indication that in 2013 Wells Fargo managed its assets better than Citibank Bodie (2013.Pg 51).
2014 profitability ratio ROA as referred to in Brick (2006.Pg 410) confidently show that Wells Fargo is again seen to be well utilizing its assets efficiently to generate revenue than Citi Bank in 2014.In this FY statistics show that Citibank utilized 0.4% of its assets while Wells Fargo used 1.45% of its assets.
1.31% of Wells Fargo Assets was used to generate the reported revenue for the year 2015 whereas 0.45% of the assets reported in the 2015 financial position of the Citibank was used to generated the 2015 revenue reported in that year. Over the three year we can conclude by saying that Wells Fargo outshines Citibank in utilization of assets in revenue generation
Financial Year 2015
By examining how shareholders’ funds were used to generate revenue is the option used to compare performance Penman (2007.Pg 476). In 2013 Wells Fargo utilized 11.22% of the shareholders’ fund to generate the revenue for that year whereas 6.7% was used by Citi bank in revenue generation a clear indication that the management of Well Fargo proofs maximum usage of the available resources for revenue generation.
The 2014 return on equity though a little bit lesser than in 2013 likewise depicts proper utilization of the shareholders fund in Wells Fargo by 10.98% than Citibank that uses 3.5% of the shareholders fund to raise the 2014 revenue. In 2015 Wells Fargo still lead in proper utilization of the shareholders fund at 10.85% while Citibank just used 3.5% in revenue generation.
Both ROA and ROE clearly indicates that Wells Fargo has shone over Citibank in utilization of assets and shareholders fund for revenue generation in the financial years 2013/2014/2015.
Credit risk analysis for Wells Fargo in the year 2013 clearly show that the net consumer losses hit 98basis while in 2014 it decreased to 65 base. An indication explaining that at Wells Fargo both commercial and consumer loan portfolio constantly got stable nearly too low levels Crook (20007.Pg 1450). We can therefore state in years 2013 backwards the credit risks were high with consumer losses as high as 110basis but over the years that has been curbed to controllable levels Yu (2008.Pg 12).Citibank credit risks was witnessed to be more high than at Wells Fargo causing loans to be valued on accrual basis Martynenko(2010.Pg. 5).
However although for both banks credit risks seemed not sparing at all, Citibank credit risks was high thus not favouring the market over the 3years as compared to the tremendous improvement in credit risk favour witnessed at Wells Fargo as per risk management caution taken.
As a matter of fact though there has been up and down experienced by the two banks it is clear show that Wells Fargo beats Citi Bank in performance as analysed by the factors of ROA, ROE, branches, employees and credit risk analysis.
Bodie, Z., 2013. Investments. McGraw-Hill.
Brick, I.E., Palmon, O. and Wald, J.K., 2006. CEO compensation, director compensation, and firm performance: Evidence of cronyism? Journal of Corporate Finance, 12(3), pp.403-423.
Crook, J.N., Edelman, D.B. and Thomas, L.C., 2007. Recent developments in consumer credit risk assessment. European Journal of Operational Research, 183(3), pp.1447-1465.
Martynenko, O. and Holst, A., 2011. Default Risk in Equity Returns.
Penman, S.H. and Penman, S.H., 2007. Financial statement analysis and security valuation (p. 476). New York: McGraw-Hill.
Yu, L., Wang, S., Lai, K.K. and Zhou, L., 2008. BioInspired Credit Risk Analysis. Springer.