Wells Fargo & Co (WFC): The Bottom Line

6.Loans and deposits continue to grow

Impressively Wells Fargo & Co (NYSE:WFC) has also been able to continue to grow its loan book, which grew by 4.5% quarter-on-quarter and 4.4% year-on-year to $800 billion, making Wells Fargo the largest residential mortgage originator in the U.S.

Just as impressively, Wells Fargo & Co (NYSE:WFC) saw deposits grow by 6% year-on-year for the first quarter 2013, giving the bank a solid loan to deposit ratio of 85%. This indicates that along with its low debt-to-equity ratio the bank has a relatively liquid balance sheet and is funding the majority of its loans from its deposit base. This is a more cost effective and ultimately profitable option than using debt.

7.Performance metrics remain strong

All of the factors discussed above have seen the bank deliver some impressive performance ratios, particularly given it is effectively operating in a zero interest rate environment. For the first quarter of 2013, it reported a return on equity of 13.6%, which is a 24 basis point increase quarter-on-quarter and 145 basis point increase year-on-year.

Its return on assets also improved to 1.49% increasing by 3 bps quarter-on-quarter and 18 bps year-on-year. Thus taking the bank´s return on assets close to the magic 1.5%, with any return on assets over this amount considered to be a solid return for a bank.

8.Solid dividend history

The final attractive feature of Wells Fargo is the bank´s attractive dividend yield of around 3%, which is the same as JPMorgan Chase & Co. (NYSE:JPM)´s, but significantly higher than the token yields paid by Citigroup Inc (NYSE:C) and Bank of America Corp (NYSE:BAC), of 0.1% and 0.3%, respectively. This dividend has also been steadily appreciating in value since the end of the Global Financial Crisis in 2009, having risen four fold in value since then.

Bottom line

It is clear why Warren Buffett likes Wells Fargo & Co (NYSE:WFC), it is a well managed institution that continues to perform consistently and deliver value for shareholders. This performance can only continue to improve, because as the largest mortgage originator in the U.S. any improvement in the U.S. economy and housing market will drive further loan growth. Overall, Wells Fargo is a stock that should form part of any long-term investment portfolio, delivering solid long-term growth while paying a consistent dividend.

The article Wells Fargo: Why It Should Be a Part of Any Long-Term Investor’s Portfolio originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.