章節 886: Chapter 886: The Core of the Future Polaris Consortium
Xia Yu first opened the first folder and browsed it.
In addition to the basic information about Polaris Capital, it contained the operating conditions of the invested companies.
Genentech, Amgen, Home Depot, Abbott Laboratories...all the companies were there, and each company had financial reports for the first and second quarters, so the operating situation was clear at a glance.
It was just that because most of the companies were in the early stages of development, the financial reports were not impressive, and there had even been continuous investment with no output. Xia Yu didn't care, as long as he could see that the money had been spent effectively.
After browsing, the situation of Polaris Capital was updated in his mind, and generally no problems were found.
Xia Yu, relieved, closed the first folder and put it aside, and opened the second folder.
After a careful look, he found that the first four pages were all table of contents, and there were 87 banks listed in the serial numbers. No wonder the folder was so thick when he opened it.
Thinking about it, it had only been less than two days since Xia Yu had called Peter Lynch from New York to prepare for the trip to San Francisco.
When the job is done well, you have to praise it. Xia Yu couldn't help but praise, 'Peter, you're very efficient and you've done a good job!'
Peter Lynch smiled and said, 'Boss, I've been paying close attention to the banking industry, especially in the first half of this year, when the fluctuation in interest rates reached the highest in the past decade. So I had someone collect information on the banking industry a long time ago to see if there were any investment opportunities. After you told me, I happened to come up with it. These 87 banks are the ones I picked out that are worth acquiring in the western United States.'
Xia Yu suddenly understood. Due to the fluctuations in the exchange rate of the US dollar and the impact of inflation, there was indeed a banking crisis in the United States in the early 1980s. Thousands of banks went bankrupt, including the core banks of the top ten conglomerates. The total number of banks in the United States plummeted from more than 70,000 to just over 50,000, and it took more than ten years to reach the number of 70,000 again.
This information gathering work seemed to be accidental, but in fact it was inevitable.
Xia Yu smiled and said, 'Anyway, you did a good job.'
Peter Lynch smiled, nodded slightly to Xia Yu and said no more.
Lowering his head again, Xia Yu first carefully browsed the catalogue, trying to find banks that would remain famous in later generations. According to historical trajectories, banks that could stand firm and grow over the next 30 years or so would definitely be the best acquisition targets in this pile of banks.
It turned out that when Xia Yu turned to page 3 and saw the name of the bank in the first line, his gaze could not help but freeze.
WELLS FARGO!
translated, it was Wells Fargo!
The only bank in the United States with an AAA rating in later generations, Wells Fargo, once known as the world's number one bank, shared the throne of the world's number one bank with ICBC four times!
Although it was surpassed later, it is still one of the Big Four banks in the United States, with a market value of around 200 billion U.S. dollars, and at its peak, it was even close to 300 billion U.S. dollars!
The Big Four banks in the United States in later generations are: Bank of ****, Bank of America, Wells Fargo, and Citigroup.
Of course, JPMorgan Chase & Co. was formed in 2000 by the merger of J. P. Morgan & Co. and Chase Manhattan Bank. Before the merger, the two companies were the financial cores of the J. P. Morgan consortium and the Rockefeller consortium respectively.
Bank of America, which has not changed its name, is still called Bank of America. It is the largest bank in the United States and the second largest bank in the world, and is the financial core of the California consortium.
Needless to say, Citibank Group is the core of the core of the First Citibank Consortium, the second largest bank in the United States and the third largest bank in the world.
Therefore, the only one of the four major banks in the United States that still has a chance is Wells Fargo.
Although there are still dozens of bank names on the table of contents that Xia Yu has not read, at this time Xia Yu simply has no heart to read them. No matter how brilliant the future will be, can it be more brilliant than Wells Fargo?
Since Peter Lynch included it in the data, it proves that Wells Fargo has a relatively high possibility of being acquired. Even though Xia Yu knew that Wells Fargo should belong to the California consortium, a sense of expectation arose in his heart.
With expectations, Xia Yu turned to the location of Wells Fargo according to the page number and read it carefully.
Wells Fargo, founded in 1852, is headquartered in San Francisco...
Because he cared, Xia Yu read it very carefully. There were ten pages in total, and he spent nearly twenty minutes reading it. He had a clear idea in his mind of Wells Fargo at this time.
At this time, Wells Fargo was indeed only a medium-sized bank, with its scope of activities basically limited to California, and 60% of it in southern California.
And Wells Fargo's main business is very distinctive. It is a community bank, which can be said to be dedicated to retail. The business of community banks accounts for more than 80% of Wells Fargo's business. Most of Wells Fargo's savings deposits also come from community retail investors, and its cooperation with large enterprises is more based on loans.
Because Wells Fargo has not yet been listed, it is not easy to collect information. The most representative information is Wells Fargo's 1979 annual report.
The annual report shows that as of December 1979, Wells Fargo's total assets were 21.4 billion US dollars, and total loans were 15.6 billion US dollars, of which 5.37 billion US dollars were personal home mortgages.
Although Wells Fargo's total assets were 21.4 billion US dollars, in the United States, where the financial industry is well developed, it is a medium-sized bank. Wells Fargo's owner's equity was only 830 million US dollars.
Owner's equity can be considered net assets, because in accounting, owner's equity refers to the ownership of the enterprise's net assets by the investor. This includes the capital invested by the investor, as well as the capital reserve, surplus reserve and undistributed profits formed during the enterprise's operating activities. It is the source of the enterprise's asset acquisition, and the relationship is expressed by the formula: assets = liabilities + owner's equity.
So don't look at Wells Fargo's total assets of 21.4 billion US dollars, but that money belongs to the depositors, and Wells Fargo is only holding it in trust.
In 1979, Wells Fargo's net profit was 130 million US dollars.
Now the US financial industry is in a downturn, and none of the top ten companies in the US are financial companies. The current average price-earnings ratio in the banking industry is around 5, which is still less than the price-earnings ratio of around 10 times when the industry was stable in the future.
According to the common price-earnings ratio of 5 times, the market value of the unlisted Wells Fargo should be 650 million US dollars, which is lower than the net assets of Wells Fargo.
This may sound outrageous, but it is actually the case today. The same applies to Bank of America and Citibank, which are also worth just over 10 billion US dollars.
The downturn in the financial sector has been dragged down by the overall environment and is also related to the global oil crisis. Five of the top ten companies in the United States are now oil companies.
That said, this year, due to the overall environment, inflation in the United States has been quite severe, causing the federal funds rate to fluctuate violently, which has triggered a series of adverse consequences.
Last year, Wells Fargo's interest rate spread was around 4.47%, but the research team at Polaris Capital has calculated that, based on market conditions, Wells Fargo's interest rate spread will be lower than 4% this year, which means that its net profit will be lower than last year.
Not only that, but because of the drastic fluctuations in the federal funds rate, Wells Fargo has to pay a higher price to attract deposits from outside, but in response to market fluctuations, Wells Fargo's benchmark interest rate has to be adjusted accordingly.
For example, the data shows that Wells Fargo's publicly announced preferential interest rate was 15%, which rose to 20% in April, but then dropped to 11% by the end of July. However, by the end of September, with the start of the Iran-Iraq War, the interest rate rose to 21%!
This interest rate fluctuated in real time, but the interest rates on previous loans and bonds were fixed.
Wells Fargo's financial report last year revealed that the average interest rate on the total loan amount of 15.6 billion was 12.7%, of which the lowest interest rate on bonds was 9.3% for 1.67 billion US dollars, the second lowest interest rate on personal home mortgages was 10.3% for 5.37 billion US dollars, and there were also real estate development loans and so on.
Now with the rise in the federal funds rate, the market bond price has fallen, with a decline of more than 10%. If these bonds are liquidated now, Wells Fargo will lose $160 million.
In summary, Wells Fargo has assets maturing in more than one year totalling about 9.5 billion US dollars. If all these assets are liquidated at the current market price, which is a 10% loss on the bonds, the loss of 9.5 billion US dollars would exceed Wells Fargo's net assets of 8.3 billion US dollars, and the bank would go bankrupt.
Fortunately, all these assets mature in more than one year, and as long as the federal funds rate is below 10% before the maturity date, Wells Fargo will not be unlucky.
Even in this case, the analysis also commented that Wells Fargo is a fairly conservative bank and a potential stock.
From this, one can imagine the pressure on other banks that have made aggressive investments in the face of such a harsh environment.
No wonder that in the past few years, more than 10,000 banks and nearly 20,000 banking institutions have closed down. Even among the top ten conglomerates, some conglomerates were unable to save their core banks and watched them close down.
At the end of the data, an analysis of the difficulty of acquiring Wells Fargo was also made.
Although Wells Fargo belongs to the California consortium, the California consortium does not value it highly. After all, it is only a medium-sized bank that has not yet gone beyond California. The California consortium's equity ratio is about 43%, which is not even a relative holding.
In addition to Wells Fargo, the California consortium also has more than a dozen financial institutions, including Bank of America, Wells Fargo, Security Pacific Bank, Wells Fargo & Company and Crocker National Bank. Which one is not bigger than Wells Fargo?
Not to mention multinational banks such as Bank of America and regional banks such as Wells Fargo Bank and Crocker National Bank, but in the San Francisco area, Wells Fargo is not as good as Wells Fargo Bank and Crocker National Bank.
Therefore, the analysis stated that the California consortium does not value Wells Fargo. In the face of the current downturn in the banking industry and the huge risk of interest rate fluctuations, the California consortium must be worried about increasing the bank's capital to withstand risks.
However, there are too many banks under the California Consortium, and even with their strength, there is still tremendous pressure.
Therefore, as long as the offer is right, the California Consortium will not refuse to sell its stake in Wells Fargo.
However, the analysis also said that although Wells Fargo is a medium-sized bank, it is conservative in its investments and has relatively stronger resilience. The California Consortium also knows that it has certain potential. If it wants to acquire the bank, it cannot rule out the possibility that the Wells Fargo board of directors will ask for an exorbitant price. A conservative estimate is that the purchase price will be more than 1 billion US dollars.
The figure of one billion US dollars not only did not make Xia Yu feel conflicted, but he was actually relieved and quite pleased.
There was no doubt that the analysis department of Polaris Capital had underestimated the potential of Wells Fargo. If Xia Yu were not a reborn person, he would have made a similar judgment.
He thought that the California consortium's evaluation of Wells Fargo would also be similar to the information in front of him, and this was an excellent opportunity.
Judging from the situation in the future, Wells Fargo's focus on the development of community banks at this time was undoubtedly very wise, and the development model was excellent.
As long as it can adhere to this model of development, it will continue to become one of the top large banks in the United States.
If it is acquired at this time, then the Polaris Consortium will have established a foothold in the United States, and it will not be afraid to compete head-on with the California Consortium's Bank of America, not to mention the fact that it will also give Wells Fargo a golden halo, and the development speed will be quite astonishing.
Therefore, Xia Yu did not hesitate for a moment, and without looking at the information of other banks, he directly handed the information to Peter Lynch. As the latter looked at the information, Xia Yu solemnly said, 'Peter, I will give you an important task. You must do your best to acquire this Wells Fargo Bank.'
'Don't say one billion dollars, even if it's fifteen billion or even twenty billion dollars, it doesn't matter. I only have one request, a full acquisition!'
'North Star Capital and all its subsidiaries need it!'
A flash of lightning crossed Peter Lynch's mind, and while his heart was pounding, he instantly understood his boss Xia Yu's purpose.
His boss was preparing to use Wells Fargo as the centre and absorb all the companies under North Star Capital to form a consortium!
He could only feel his blood rushing, and he couldn't help but look at Xia Yu and ask, 'Boss, are you trying to build a consortium?'
His goal had been instantly seen through by Peter Lynch, but Xia Yu was not surprised.
Peter Lynch had spent many years on Wall Street, where there were many consortia, and he must have done a lot of research on them, so it was normal for him to see through it.
In the United States, where consortia were everywhere, it was very common for companies and families, large and small, to band together to form consortia. Xia Yu therefore did not hide it and nodded, saying, 'Yes, I do have this idea, so you understand the importance of acquiring Wells Fargo, don't you?'
Although he didn't know why the boss had set his sights on Wells Fargo, Peter Lynch didn't ask. He was in high spirits and nodded resolutely, saying, 'I understand, boss. Don't worry, I will definitely acquire Wells Fargo.'
Xia Yu nodded, because he cared, and still not at ease, he once again urged Peter Lynch, 'Peter, now that the oil crisis has erupted, it has a severe impact on the financial industry. We must seize the opportunity and strive to acquire Wells Fargo by the end of the year. It doesn't matter if the price is high. Of course, if you can lower the cost a bit, I won't be stingy with the bonus at the end of the year.'
Peter Lynch solemnly replied, 'Boss, I won't let you down.'
After that, Peter Lynch hurriedly left the office to build the Wells Fargo acquisition team.
Xia Yu stayed at the company until about 11:10 p.m., and then received a notification from an employee. He immediately called Li Wuming and went downstairs together to prepare to go back.
The person he was waiting for had already arrived and should go back as well.
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