Wells Fargo & Company is the fourth largest bank in the United States (based on consolidated asset data gathered by the Federal Reserve as of March 31, 2012). Its consolidated statement of income follows.

1. How is this income statement different from all the other income statements illustrated in this chapter?
2. For a merchandising firm, gross profit represents sales less cost of goods sold. For Wells Fargo, what component of the income statement would be similar to gross profit?
3. Compute the following ratios for each of the years 2009-2011: (a) Total interest expense/Total interest income, (b) Incentive compensation/Salaries, and (c) Employee benefits/Salaries.
4. Comment on the ratios you computed in part (3), particularly any trends.
5. The average loans receivable balance for Wells Fargo during 2011 was $742,252 million. The average amount of deposits during 2011 was $884,006 million. Using the income statement data, comment on the average interest rate Wells Fargo pays to its depositors, the average interest rate Wells Fargo earns on its loans receivable, and the spread between these two rates.
6. The market value of Wells Fargo's stock at the end of each year was $27.56, $30.99, and $26.99 for the years 2011, 2010, and 2009, respectively. Compute the firm's price-earnings ratio for each year. Use diluted earnings per share. Is it increasing or decreasing over time?

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Wells Fargo & Company and Subsidiaries 12 Months Ended Consolidated Statement of Income (USD S) In Millions, except per share amounts Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2009 Interest income Trading assets Securities available for sale Mortgages held for sale Loans held for sale Loans Other interest income Total interest income. Interest expense Deposits Short-term borrowings Long-term debt Other interest expense Total interest expense Net interest income Provision for credit losses Net interest income after provision for $ 1,440 8,475 1,644 $ 1,098 9,666 1,736 101 39,760 435 52,796 $ 918 11,319 1,930 183 41,589 335 56,274 37,247 548 49,412 2,832 92 4,888 227 8,039 44,757 15,753 3,774 2,275 80 3,978 316 6,649 42,763 7,899 5,782 172 9,950 46,324 21,668 29,004 credit losses Noninterest income Service charges on deposit accounts Trust and investment fees Card fees. Other fees. Mortgage banking Insurance Net gains from trading activities. 34,864 24,656 4,280 11,304 3,653 4,193 7,832 1,960 1,014 4,916 10,934 3,652 3,990 9,737 2,126 1,648 5,741 9,735 3,683 3,804 12,028 2,126 2,674 12 Months Ended Consolidated Statement of Income (USD $) In Millions, except per share amounts Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2009 Net gains (losses) on debt securities available for sale Net gains from equity investments Operating leases 54 1,482 524 1,889 38,185 (324) 779 (127) 685 1,828 42,362 Total noninterest income Noninterest expense Salaries. Commission and incentive compensation Employee benefits Equipment Net occupancy Core deposit and other intangibles. FDIC and other deposit assessments 40,453 14462 8,857 4,348 2,283 3,011 1,880 1,266 13,869 8,692 4,651 2,636 3,030 2,199 1,197 14,182 50,456 19,001 6,338 12,663 13,757 8,021 4,689 2,506 3,127 2,577 1,849 12,494 49,020 17,998 5,331 12,667 Total noninterest expense Income before income tax expense Income tax expense Net income before noncontrolling interests Less: Net income from noncontrolling 49,393 23,656 7,445 16,211 392 interests Wells Fargo net income Less: Preferred stock dividends and other Wells Fargo net income applicable to 15,869 844 $12,362 12,275 common stock 15,025 $11,632 7,990 Per share information arnings per common share Diluted earnings per common share Dividends declared per common share $2.85 $2.82 $0.48 5,278.1 5,323.4 $2.23 $2.21 $0.20 5,226.8 5,263.1 $1.75 $0.49 4,545.2 4562.7 . Diluted average common shares outstanding