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Wells Fargo & Co (WFC), Bank of America Corp (BAC), and Why This Bank Is a Smash Hit

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Wells Fargo & CoWells Fargo & Co (NYSE:WFC)’s most recent quarter was not a smash hit in terms of revenue. However, the company was able to improve the overall efficiency of its operations. Wells Fargo & Co (NYSE:WFC) saw reasonable improvements in its total profitability by refocusing its product portfolio from revenue generating activities to profit generating activities. The company has been really focused on cross-selling financial products.

Wells Fargo & Co (NYSE:WFC) has been able to improve its cross-sell from 5.98 to 6.10. Cross-selling basically involves selling pre-existing customers into other financial products that the bank offers. Improving cross-sell improves the overall profitability and revenue of the bank. Cross-selling has seen grown from 6.05 in 4Q 2012 to 6.10 in Q1 2013.

Wells Fargo isn’t the only bank relying upon cross-selling

Bank of America Corp (NYSE:BAC), and JPMorgan Chase & Co. (NYSE:JPM) have been really active in trying to sell financial products outside of lending. As a result, Bank of America Corp (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM) have been able to improve profitability.

Bank of America Corp (NYSE:BAC) was able to improve its profitability quarter-over-quarter from 2.76% to 4.68% due to cross-selling, along with a host of other reasons. While cross-selling isn’t the only factor that is contributing to Bank of America Corp (NYSE:BAC)’s success, it is at least improving profitability, and better maximizing the amount of revenue it generates from its pre-existing business activities.

JPMorgan also hopes to improve its profitability by investing heavily in customer service initiatives. It has been able to improve profit margins from 18.37% in 4Q 2012 to 20.08% in 1Q2013. JPMorgan Chase & Co. (NYSE:JPM) already operates a heavily diversified portfolio of financial products.

Wells Fargo generates half of its revenue from fees, and it is likely that Wells Fargo & Co (NYSE:WFC) can further maximize profits through further increases in its cross-sells. In fact, every universal bank is aggressively expanding its product portfolios in order to maximize cross-selling opportunities.

Macroeconomics

The macro-economic environment has seen some reasonable improvement. The U.S. total debt has stabilized, and may have bottomed. Overall economic sentiment has been improving. The unemployment rate has been on a continuous decline, which may imply further demand for debt in future years. Currently, the unemployment rate is 7.60%.

The improving economy will certainly help Wells Fargo going forward

Wells Fargo was able to improve its net income to $5.171 billion in Q1 2013 from $4.248 billion in Q1 2012. The improving net income is attributable to falling legal expenses, along with declining loan loss allowances.

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