When bank experts think about Wells Fargo (NYSE:WFC), they think of it as the nation's fourth-biggest bank by assets. But the problem with using this single number is that it glosses over areas in which the California-based lender has already captured the pole position, including loans, net interest income, and market valuation.

1. Loans
Wells Fargo is the biggest bank in America when it comes to loans, the industry's single biggest asset category.

The two other coast-to-coast retail banks, JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC), each has more total assets than Wells Fargo, but a larger percentage of their assets consist of fixed-income securities -- things like Treasury bonds, or mortgage-backed securities issued by Fannie Mae or Freddie Mac.



Total Assets

Loans as a Percent of Total Assets

JPMorgan Chase

$810 billion

$2.42 trillion


Bank of America

$888 billion

$2.15 trillion


Wells Fargo

$904 billion

$1.75 trillion


Data source: JPMorgan Chase, Bank of America, and Wells Fargo's quarterly financial supplements.

Wells Fargo can dedicate a larger share of its asset portfolio to loans because it has largely eschewed trading and other investment banking activities that require universal banks (those with both traditional and investment banking operations, such as JPMorgan Chase and Bank of America) to hold highly liquid assets.

2. Net interest revenue
Because Wells Fargo owns more loans than any other bank, it makes sense that it also earns more net interest income (interest income minus interest expense). This follows from the fact that loans yield more than fixed-income securities. You can see this in the table below, which compares the yields that JPMorgan Chase, Bank of America, and Wells Fargo earn on their loan and securities portfolios.


Loan Yield (3Q15)

Yield on Securities Portfolio (3Q15)

Yield on All Interest-Earning Assets (3Q15)

JPMorgan Chase




Bank of America




Wells Fargo




*Excludes impact of market-related adjustments. Data source: JPMorgan Chase, Bank of America, and Wells Fargo's quarterly financial supplements.

On top of this, Wells Fargo enjoys the lowest cost of funds among the nation's leading banks. It paid an interest rate of only 0.25% to borrow $1.6 trillion last quarter. That compares to costs of funds of 0.45% and 0.76% at JPMorgan Chase and Bank of America, respectively. This advantage widens Wells Fargo's net interest margin, which measures how much a bank earns in net interest income compared to the size of its interest-earning assets, and provides another explanation for why Wells Fargo earns more net interest income than any other U.S. bank.

3. Market capitalization
Thanks to these advantages, shares of Wells Fargo trade for a higher valuation multiple than its too-big-to-fail peers. Investors and analysts measure this with the price-to-book-value ratio, which compares a bank's share price to its book value per share.

Wells Fargo's shares currently trade for 1.63 times book value. By contrast, shares of JPMorgan Chase are valued at 1.10 times book value, and Bank of America's shares are priced at 0.76 times book value.


Price-to-Book Value Ratio

Book Value

Market Capitalization

JPMorgan Chase


$222 billion

$244 billion

Bank of America


$237 billion

$180 billion

Wells Fargo


$172 billion

$281 billion

Data source: Yahoo! Finance, calculations by author.

If you multiply these ratios by the banks' reported book values, you see that Wells Fargo has the highest market capitalization in the industry. This is an impressive accomplishment when you consider that the California-based lender's stated book value is 22% less than JPMorgan Chase's and 27% less than Bank of America's.

In sum, while Wells Fargo might not officially be the biggest bank in America -- based on total assets, that is -- it has rapidly gained market share in specific areas, surpassing its peers when it comes to loans, net interest income, and market capitalization. Whether this is a sign of things to come remains to be seen, but there's little reason to think that Wells Fargo won't someday sit atop the industry in an even larger number of key areas.

John Maxfield has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Wells Fargo. The Motley Fool has the following options: short January 2016 $52 puts on Wells Fargo. The Motley Fool recommends Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.