Wells Fargo (NYSE: WFC)Jonathan Ketterer

Recession

Profitability

Company Name Total Assets MRQ ($000)ROAA

LTM (%)ROAE

LTM (%)

Net Interest Margin

LTM (%)

Efficiency Ratio

LTM (%)

Noninterest Inc/

Operating Rev

LTM (%)Citigroup Inc. 1,880,617,000 0.75 7.11 2.93 64.46 37.84

Bank of America Corp. 2,102,273,000 0.53 4.89 2.46 80.98 50.15

JPMorgan Chase & Co. 2,415,689,000 0.75 8.64 2.23 74.50 53.59

U.S. Bancorp 364,021,000 1.63 13.88 3.44 51.30 45.25

PNC Financial Services Group 320,296,000 1.38 9.98 3.57 60.61 41.74

BB&T Corp. 182,341,000 0.96 7.90 3.68 58.54 40.70

Fifth Third Bancorp 130,443,000 1.48 12.73 3.32 62.77 43.03

Minimum 0.53 4.89 2.23 51.30 37.84

Median 0.96 8.64 3.32 62.77 43.03

Average 1.07 9.30 3.09 64.74 44.61

Maximum 1.63 13.88 3.68 80.98 53.59

Wells Fargo & Co. 1,527,015,000 1.53 13.47 3.39 58.03 48.02

Revenue Diversification as of 4Q13

Geographic Reach

Regulatory Risks Basel I Tier 1 Common equity ratio:

10.82% Basel III Advanced Approach: 9.78%

(March 2018, 10.5%)

Economic Moat Narrow, due to money’s commodity-like

nature Leads Big 4 Banks in Efficiency Ratio @

58.5% Sticky Customer Base

U.S. Deposit Market Share as of 6/30/2013

US            

2013 Rank

2012 Rank Institution (ST)

2013 Total

Deposits ($000)

2013 Total

Market

Share

(%)

2012 Total

Deposits in

Market

($000)

2012 Total

Market

Share

(%)1 1 Bank of America Corp. (NC) 1,012,454,914 12.00 1,008,229,328 12.502 2 Wells Fargo & Co. (CA) 937,241,847 11.11 861,957,613 10.693 3 JPMorgan Chase & Co. (NY) 916,568,626 10.87 832,480,563 10.324 4 Citigroup Inc. (NY) 444,913,722 5.28 393,498,779 4.885 5 U.S. Bancorp (MN) 241,338,523 2.86 226,159,281 2.806 6 PNC Financial Services Group (PA) 209,784,952 2.49 203,375,163 2.527 7 Capital One Financial Corp. (VA) 188,044,482 2.23 189,268,466 2.358 8 Toronto-Dominion Bank 178,319,573 2.11 159,329,492 1.989 9 BB&T Corp. (NC) 138,497,550 1.64 137,109,124 1.7010 11 Bank of New York Mellon Corp. (NY) 133,066,017 1.58 127,972,134 1.59

Credit Quality

Company NameNCOs/ Avg

Loans LTM (%)Citigroup Inc. 1.58Bank of America Corp. 0.84JPMorgan Chase & Co. 0.80U.S. Bancorp 0.64PNC Financial Services Group 0.56BB&T Corp. 0.67Fifth Third Bancorp 0.56Minimum 0.56

Median 0.67Average 0.81Maximum 1.58

Wells Fargo & Co. 0.54

Balance Sheet

Company Name

Tangible Equity/

Tangible Assets

2013Q4 (%)Loans/ Assets

2013Q4 (%)

Loans/ Deposits

2013Q4 (%)

Prelim Basel III T1 Common

Ratio 2013Q4 (%)

NPAs/ Assets 2013Q4 (%)

NCOs/ Avg Loans 2013Q4

(%)Citigroup Inc. - 35.45 68.96 10.50 1.44 1.52

Bank of America Corp. - 44.33 82.93 9.96 1.76 0.67

JPMorgan Chase & Co. 6.83 30.36 56.39 9.50 0.91 0.73

U.S. Bancorp 8.97 64.33 89.13 8.80 1.34 0.54

PNC Financial Services Group 11.09 61.09 88.54 9.40 1.46 0.38

BB&T Corp. 8.82 63.64 90.93 9.60 1.29 0.49

Fifth Third Bancorp 9.52 67.83 89.26 8.99 2.62 0.67

Minimum 6.83 30.36 56.39 8.80 0.91 0.38

Median 8.97 61.09 88.54 9.50 1.34 0.67

Average 9.05 52.43 80.88 9.54 1.52 0.71

Maximum 11.09 67.83 90.93 10.50 2.62 1.52

Wells Fargo & Co. 9.34 54.67 76.52 9.78 2.26* 0.46

ManagementJohn G. Stumpf - 31 years with the Company or its predecessors Chairman, President & CEO (President & CEO 2007-Pres)

Timothy J. Sloan - 25 years Senior EVP & CFO

Avid Modjtabai - 19 years Senior EVP, Consumer Lending

David Allen Hoyt - 31 years Senior EVP, Wholesale BankingDavid M. Carroll - 31 years (from Wachovia) Senior EVP of Wealth, Brokerage & Retirement ServicesCarrie L. Tolstedt - 23 years Senior EVP, Community Banking

Valuation

Company NamePrice/ Book

(%)

Price/ Tangible Book

(%)Citigroup Inc. 73.9 -

Bank of America Corp. 78.7 -

JPMorgan Chase & Co. 108.2 143.8

U.S. Bancorp 202.5 279.9

PNC Financial Services Group 111.2 148.4

BB&T Corp. 130.5 205.9

Fifth Third Bancorp 135.3 164.9

Minimum 73.9 143.8

Median 111.2 164.9

Average 120.0 188.6

Maximum 202.5 279.9

Wells Fargo & Co. 154.7 193.9

Margin of Safety Current Price: $46.08 Target Price: $52.92 Margin of Safety: 15% Projected only 6 years with SNL Bank

Valuation Model

Company Wells Fargo & Co.

Years 6

Discount Rate 11.72 %

Terminal Value Multiple P/E 13.00 x

Projected Value of Firm ($000) 278,222,279

Projected Per Share Value of Firm ($) 52.92

Sensitivity Analysis

Projected Firm Value Sensitivity Analysis ($000)

Terminal Value Multiple Discount Rate

9.72% 10.72% 11.72% 12.72% 13.72%

11.00x 51.41 48.99 46.70 44.55 42.52

12.00x 54.88 52.27 49.81 47.50 45.32

13.00x 58.34 55.55 52.92 50.44 48.11

14.00x 61.81 58.83 56.03 53.39 50.91

15.00x 65.27 62.11 59.14 56.34 53.70

Recommendation Replace F5 Networks with Wells Fargo