Wells Fargo (WFC) Sees Record Q1 Net Income, EPS Well Above Street Estimates

April 9, 2009 8:08 AM EDT

Wells Fargo & Company (NYSE: WFC) expects to report record net income of approximately $3 billion for first quarter 2009, or approximately $0.55 per common share after preferred dividends, including $372 million in dividends paid to U.S. taxpayers on the U.S. Treasury’s Capital Purchase Program investment. The Company will report its financial results on April 22, 2009.

CEO John Stumpf said, "Our business momentum is strong, and we expect our operating margins to remain at the top of our peer group."

Wells Fargo said expected results include:

• Total revenue of $20 billion, including another quarter of double-digit revenue growth at legacy Wells Fargo, up an estimated 16 percent;
  
• Strong operating results at legacy Wachovia
  
• Solid operating margins with consolidated net interest margin of approximately 4.1 percent and efficiency ratio of approximately 56 percent;
  
• Combined net charge-offs of $3.3 billion, compared with fourth quarter net charge-offs totaling $2.8 billion at legacy Wells Fargo and $3.3 billion at legacy Wachovia;
  
• Provision expense of approximately $4.6 billion, including $1.3 billion credit reserve build, bringing the allowance for credit losses to $23 billion; and
  
• Pre-tax pre-provision profit of approximately $9.2 billion.

Wells Fargo said it continued to extend significant amounts of credit to U.S. taxpayers in first quarter 2009:

• Approximately $175 billion in loan commitments, mortgage originations and mortgage securities purchases in the first quarter;
  
• $190 billion in mortgage applications for over 800,000 homeowners in the first quarter, up 64 percent from prior quarter, including record $83 billion applications in March;
  
• Funded over $100 billion in mortgage loans, helping over 450,000 homeowners either purchase a home or lower their payments through refinancing;
  
• Over 150,000 mortgage solutions in the first quarter to help homeowners remain in their homes; and
  
• More than $225 billion of credit extended to U.S. taxpayers since early last October, nine times the amount received from U.S. taxpayers through the U.S. Treasury’s Capital Purchase Program investment.

Wells Fargo said the Wachovia acquisition exceeding expectations.

• Strong revenue contribution from legacy Wachovia, about 40 percent of combined revenue;
  
• Loan, deposit and client asset business activity has resumed and customers are returning; positive consumer and small business checking account growth;
  
• Reconfirming $5 billion of expected annual merger-related expense savings, which will begin emerging in the second quarter and are expected to be fully realized upon completion of the integration; and
  
• Purchase accounting adjustments overall remain in line with December 31, 2008, marks.

Tangible common equity (TCE) ratio expected to increase in first quarter. Tangible common equity is expected to be above 3.1 percent of tangible assets at March 31, 2009. The 85 percent reduction in the Company’s common stock dividend from $0.34 per share to $0.05 per share announced on March 6, 2009, will benefit retained earnings by about $1.25 billion in additional common equity per quarter, the equivalent of about 10 basis points of TCE per quarter, beginning in the second quarter.

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Related Entities

• Wachovia
• Dividend
• Treasury Capital Purchase Program
• Mortgage Applications

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