Wells Fargo & Company is the fourth largest bank in the U.S. (based on consolidated asset data gathered by the Federal Reserve as of March 31, 2010). Its consolidated statement of income follows.

Net gains (losses) on debt securities available for sale
(includes impairment losses of $1,012, consisting of $2,352
of total other-than-temporary impairment losses, net of $1,340
recognized in other comprehensive income, for the year
ended December 31, 2009) . . . . . . . . . . . . . . . . . . . . . . (127) .............. 1,037 ..........209
Net gains (losses) from equity investments
(includes impairment losses of $655 for the

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 2007-2009: (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 2009 was $801,036million. The average amount of deposits during 2009 was $802,710 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 $26.99, $29.48, and $30.19 for the years 2009, 2008, and 2007, 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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12 Months Ended Consolidated Statement of Income (USD S) In Millions, except Per Share data Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2007 Interest income Trading assets Securities available for sale Mortgages held for sale Loans held for sale $ 918 11,319 1,930 $ 173 3,451 5,287 1,573 41,589 27,632 181 34,898 29,040 Other interest income Total interest income Interest expense 56,274 35,177 3,774 4,521 1,478 8,152 1,245 12 Months Ended Consolidated Statement of Income (USD S) In Millions, except Per Share data Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2007 Total interest expense Provision for credit losses Net interest income after provision for credit losses..... Trust and investment fees. Net gains from trading activities........ . Noninterest expense Commission and incentive compensation Core deposit and other intangibles FDIC and other deposit assessments...__.. . Income before income tax expense Net income before noncontrolling interests Less: Net income from noncontrolling interests. Wells Fargo net income applicable to common stock $2,369 Diluted earnings per common share Dividends declared per common share...... . . Diluted average common shares outstanding.