Comparative Analysis on Statements of Wells Fargo & Company and Bank of America Corporation

PROFILES OF WELLS FARGO & COMPANY

According to Datamonitor Report (2011), Wells Fargo & Company (Wells Fargo) is a diversified financial holding company, providing retail, commercial and corporate banking services through banking stores located in 39 states of the US. The company primarily operates in the US. It is headquartered at San Francisco, California and employs 275,000 people. The recorded revenues during FY2010 decrease 3.9% compared to FY 2009, while the operating profit in FY2010 increase 5.6% over FY 2009 (p. 4).

PROFILES OF BANK OF AMERICA COPERATION

Datamonitor Report (2011) point out that Bank of America Corporation is a bank holding company, and a financial holding company. The company is a financial institution, serving individual consumers, small and middle market businesses, large corporations and governments with a range of banking, investing, asset management and other financial and risk management products and services (p. 5).

FINANCIAL STATEMENT ANALYSIS CONTENT

Helfert(2001) indicated that profitability of a company is relevant to the security of financial claims, the rate of return and the performance of managers (p. 31). Due to the emphasis on company's profitability, I'm going to analyze the profitability from different ratios and indexes.

COMPARATIVE ANALYSIS OF BASIC FINANCIAL DATA

Table 1 Total Asset

Scale: Millions

2007 2008 2009 2010 2011

BOA 1,715,746 1,817,943 2,223,299 2,264,909 2,129,046

WELLS FARGO 575,442 1,309,639 1,243,646 1,258,128 1,313,867

Data Source: MERGENT Online

Bar Chart 1 Total Asset

Scale: Millions

From the Table and the Bar chart, we can see that the total asset of BOA is increasing steadily from 2007 to 2010, while a slight decrease happened in 2011. Obviously, the scale of the Wells Fargo's total assets is smaller than BOA's. Moreover, there is not significance change of the total asset of Wells Fargo during 2008 to 2011.

Table 2 Total Revenue (net of interest expense)

Scale: Million

2007 2008 2009 2010 2011

BOA 66,319 72,782 119,643 110,220 93,454

WELLS FARGO 18,416 16,754 42,362 40,453 38,185

Data Source: MERGENT Online

Bar chart 2 Total Revenue (net of interest expense)

Scale: Million

As the two charts shown, the total revenue of both company peaked in 2009. It is explainable that he scale difference is similar to the total asset mentioned above.

Table 3 Net Income

Scale: Million

2007 2008 2009 2010 2011

BOA 14,982 4,008 6,276 -2,238 1,446

WELLS FARGO 8,057 2,655 12,667 12,663 16,211

Data Source: MERGENT Online

Bar Chart 3 Net Income

Scale: Million

The net income of Wells Fargo started to increase in 2008 and exceeded BOA from 2009. In adverse, BOA's net income fell dramatically from 2007 and finally became loss in 2010. The loss was primarily due to the increase of representations and warranties expense in 2010.

RATIOS ANALYSIS ON ASSETS AND LIABILITIES ACCOUNTS

Table 4 Cash/Total Assets

2007 2008 2009 2010 2011

BOA 2.48% 1.81% 5.46% 4.79% 5.64%

WELLS FARGO 2.56% 1.81% 2.18% 1.28% 1.48%

Data Source: MERGENT Online

Line Graph 1 Cash/Total Assets

Although the two company's ratios were very close in 2007 and 2008, the ratio of cash and total assets of BOA was increasing from 2008, on the contrast; the ratio of Wells Fargo was slowly decreased from 2008. However, the ratios are all less than 6% which indicates that the cash accounts for a very small percentage of the total asset.

Table 5 Curr. Liab/Tot. Liab

2007 2008 2009 2010 2011

BOA 12.18% 9.63% 3.49% 2.94% 1.88%

WELLS FARGO 5.76% 3.79% 1.15% 1.54% 1.54%

Data Source: MERGENT Online

Line Graph 2 Curr. Liab/Tot. Liab

From the comparison of the two ratios, we can see that the two companies overall changes are in familiar tendency. During 2007 and 2011, the ratios are decreasing sharply, showing that the current liabilities accounts for a small percentage of total liabilities. In other words, long-term liabilities accounts for a more significant percentage of total liabilities.

ANALYSIS ON PROFITABILITY RATIOS

RETURN ON ASSET

Return on Asset (ROA) is an indicator of how profitable a company is relative to its total assets. Calculated by dividing a company's annual earnings by its total assets, ROA is