Wells Fargo & Company
) joined U.S. mega banks like
Bank of America Corporation
Fifth Third Bancorp
) in announcing a pay hike for its chief executive officer. Wells
Fargo increased CEO John Stumpf's salary by 15% to $22.87 million
in 2012, making him the highest paid CEO of a chief U.S.
The package includes salary of $2.8 million, incentive award of
$4 million, gains in pension of $3.5 million and stock awards of
This pay hike came on the back of certain factors, including
Wells Fargo's financial performance in 2012. The company's net
income, applicable to common shareholders, climbed 19% to $18
billion last year. However, this pay rise is subject to
Well's Fargo has performed exceptionally well in the recent years
under Stumpf, posting record earnings besides being the market
leader in residential mortgage lending. Further, it performed
admirably well in the stress test and the Federal Reserve has
approved of the company's 2013 capital plan under the recently
concluded Comprehensive Capital Analysis and Review (CCAR) of the
nation's largest banks.
The company confirmed that its 2013 Capital Plan includes a
proposed dividend rate of 30 cents per share for the second
quarter of 2013, a hike of 20% from the current dividend of 25
cents. Further the company's capital plan includes a proposed
boost to the share buyback activity for 2013 compared with
Earlier in January, the company increased its dividend by 14%,
under the capital plan of 2012. The clearance of the stress test
and subsequent dividend hike as well as the strategy to increase
share buybacks will boost investors' confidence.
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These bear testimony to the fact that the company is performing
well under the reign of the present CEO and that the pay-package
We believe that over the long-term Wells Fargo will remain
comfortably positioned to benefit from a recovering economy,
given its diverse geographic mix. Further, strategic acquisitions
will likely help the company expand its business and improve
profitability. Solid capital levels, prudent expense management
as well as expected improvement in credit quality though at a
slower pace, will support Wells Fargo's profit figures.
Yet, we believe that the top-line headwinds would persist, given
the protracted economic recovery. In addition, a low interest
rate environment would keep its margins under pressure. Wells
Fargo's unrelenting legacy mortgage issues also remain a concern.
With stringent banking regulations, there will be pressure on
fees and loan growth could remain feeble.
Wells Fargo currently retains a Zacks Rank #3 (Hold). Among other
major banks that are performing well include
), which carries a Zacks Rank #2 (Buy).