Wells Fargo & Company · NYSE:WFC
Wells Fargo & — Q3 2009 Earnings Presentation
32 slides from Wells Fargo &'s earnings presentation, Oct 21, 2009
Slide 1: 3Q09 Quarterly Supplement
3Q09 Quarterly Supplement October 21, 2009
Slide 2: Forward-looking statements and additional information
Forward-looking statements and additional information Forward-looking statements: This Quarterly Supplement contains forward-looking statements about our future financial performance. These forward-looking statements include statements using words such as "believe," "expect," "anticipate," "estimate
Slide 3: Table of Contents
Table of Contents 3Q09 Highlights 3Q09 Earnings overview Key drivers of results Page 4 Page 5 Credit Highlights Credit quality highlights Nonperforming assets Nonaccrual loan growth Net loan charge-offs Purchased credit-impaired (PCI) loan portfolio update Loan portfolio risk reduction Page 7 Page 8
Slide 4: 3Q09 Highlights
3Q09 Highlights Wells Fargo 3Q09 Supplement
Slide 5: 3Q09 Earnings overview
3Q09 Earnings overview Record net income of $3.2 billion Third consecutive quarter of net income above $3.0 billion $7.6 billion YTD net income applicable to common stock EPS of $0.56 up 14% from a year ago YTD diluted EPS of $1.69 up 4% from a year ago
Slide 6: Key drivers of results
Key drivers of results Solid, broad-based revenue momentum; 3Q revenue near 2Q record level Pre-tax, pre-provision more than 2X quarterly net charge-offs Double-digit revenue growth in asset management, auto lending, consumer finance, debit cards, retirement services, SBA lending and wealth manageme
Slide 7: Credit Highlights
Credit Highlights Wells Fargo 3Q09 Supplement
Slide 8: Credit quality highlights
Credit quality highlights Allowance for credit losses $24.5 billion 3.07% of total loans 118% of nonaccrual loans Covers inherent losses in performing and non-performing portfolios at 9/30/09 $1.0 billion reserve build Commercial roughly $900 million $400 million related to further deterioration in
Slide 9: Nonperforming assets
Nonperforming assets The current loan-to-value (LTV) ratio is calculated as the outstanding loan balance divided by the collateral value. The table above does not include PCI loans that were contractually 90 days past due and still accruing. Excludes GNMA and similar loans whose repayments are insur
Slide 10: Nonaccrual loan growth
Nonaccrual loan growth Legacy Wells Fargo and Wachovia growth rates decelerating, even with impact due to purchase accounting Nonaccrual balances reflect nominal outflows in the Wachovia portfolio following the virtual elimination of nonaccrual loans at time of merger, in addition to the foreclosure
Slide 11: Net loan charge-offs
Net loan charge-offs Legacy Wells Fargo commercial and CRE losses declined 4% linked quarter Legacy Wells Fargo consumer losses essentially flat linked quarter Wachovia commercial and CRE losses reflects purchase accounting effect Loss rate roughly comparable to Wells Fargo's higher-quality commerci
Slide 12: Purchased credit-impaired (PCI) loan portfolio update
Purchased credit-impaired (PCI) loan portfolio (1) update $96.2 billion of Wachovia purchased credit-impaired loans at 12/31/08 with $40.9 billion life- of-loan purchase accounting marks $20.1 billion of Wachovia nonaccrual loans eliminated at 12/31/08 through purchase accounting Pick-a-Pay impaired
Slide 13: Loan portfolio risk reduction
Loan portfolio risk reduction Certain consumer loan portfolios being run off and risk being reduced through paydowns, net charge-offs and sales Loans outstanding down $4.7 billion from 2Q09 and $14.2 billion since year-end Wachovia Wholesale Banking Commercial Real Estate loan outstandings of $43.1
Slide 14: Commercial real estate loan portfolio
Commercial real estate loan portfolio Wholesale Banking = $79.1 billion Additional information on page 14 Community Banking = $49.9 billion Regional Business Banking = $39.0 billion Legacy Wells Fargo portfolio = $21.3 billion Average LTV = 58% Average loan size = $604,000 Non-Wachovia acquisitions
Slide 15: Wholesale Banking commercial real estate loan portfolio
Wholesale Banking commercial real estate loan portfolio (1) Wholesale Commercial Real Estate = $91.4 billion (1) Legacy Wells Fargo CRE portfolio = $34.3 billion Seasoned senior management team with strong tenured underwriting experience Distinctive portfolio monitoring process followed; risk of eac
Slide 16: Commercial real estate loan portfolio
Commercial real estate loan portfolio (1) Office RE-Other Industrial Retail Apartments Land-Unimproved Shopping Hotel/Motel Other 1-4 family st 1-4 family ln 28.48 18.36 15.03 12.55 12.21 9.58 8.49 6.24 5.14 3.91 3.85 CA FL TX NC GA VA NY AZ NJ Other 26.69 13.39 9.64 7.27 5.49 5.19 4.73 4.57 3.7 43.
Slide 17: Pick-a-Pay mortgage portfolio
Pick-a-Pay mortgage portfolio Book balance of $87.8 billion in first lien loans outstanding, down $2.6 billion from 2Q09 on paid-in-full loans and loss mitigation efforts Unpaid principal balance of $107.3 billion, down $10.0 billion from 4Q08 Pick-a-Pay loans, which have negative amortization poten
Slide 18: Pick-a-Pay mortgage portfolio life-of-loan losses
Pick-a-Pay mortgage portfolio life-of-loan losses Based on recent data and our current view of the mortgage market, life-of-loan loss estimates for both impaired and non-impaired Pick-a-Pay portfolios have improved from our acquisition models Due to our improved outlook, beginning in 4Q09, we expect
Slide 19: Pick-a-Pay credit highlights
Pick-a-Pay credit highlights Pick-a-Pay non-impaired portfolio Nonaccrual loans up $1.2 billion Largely due to inflows occurring after post- purchase accounting write-downs TDRs $310 million of increase $2.3 billion in nonaccruals includes $432 million of non-accruing TDRs of which 91% are cash payi
Slide 20: Pick-a-Pay loan modifications
Pick-a-Pay loan modifications 3Q09 full-term modifications of nearly 20,000; over 43,500 YTD 89% of modifications have been in the impaired portfolio 22% of purchased credit-impaired portfolio has been modified YTD through September 30, 2009; up from 10% as of June 30, 2009 Nearly 70,000 modificatio
Slide 21: Home equity portfolio
Home equity portfolio (1) Core Portfolio Outstandings down 2% QoQ on higher prepayments and higher charge-offs High quality new originations with weighted average CLTV of 59%, 775 FICO and 31% total debt service ratio 3Q09 losses up $123 million on higher frequency rates while severity increases hav
Slide 22: Financial Updates
Wells Fargo 3Q09 Supplement Financial Updates a
Slide 23: Wachovia merger update
Wachovia merger update Merger integration currently on plan, on schedule and under budget Merger costs currently estimated to be approximately $5.5 billion Lower estimate reflects lower retention costs, lower severance and continued refinement of estimates as conversion plans have developed A portio
Slide 24: Capital update
Capital update Generated $20 billion during the past six months toward the $13.7 billion SCAP capital buffer requirement through strong internal capital generation as well as 2Q09 capital raise Internally generated $5.8 billion in 3Q09 Strengthened capital ratios Tier 1 capital ratio (1) of 10.6% vs
Slide 25: FAS 166 and FAS 167 update
FAS 166 and FAS 167 update Application of FAS 166 and FAS 167 will result in the 1/1/2010 consolidation of certain formerly qualifying SPEs and VIEs currently not included in our financial statements Required to have both power/control and some benefit/risk to be considered for consolidation Updated
Slide 26: Outlook
Wachovia merger costs: Estimates lowered to approximately $5.5 billion Wachovia merger cost saves: Reconfirming $5 billion estimate in annual efficiencies upon completion of the integration Nonperforming assets: Expect balances to continue to increase though rate of increase to decelerate New inflow
Slide 27: Appendix
Wells Fargo 3Q09 Supplement Appendix 26
Slide 28: Real estate 1-4 family first mortgage portfolio
Real estate 1-4 family first mortgage portfolio First lien mortgage loans down 2% Core mortgage relatively stable Run-off portfolio (1) down 3% Purchased credit-impaired portfolio down 6% Core first lien mortgage nonaccrual loans up $964 million $437 million increase from legacy Wells Fargo $527 mil
Slide 29: Wells Fargo Financial debt consolidation mortgage portfolio
Wells Fargo Financial debt consolidation mortgage portfolio Debt consolidation loans are real estate-secured loans originated through Wells Fargo Financial's U.S. retail stores designed to help homeowners repay other sources of debt Net charge-off ratio of 3.22%, below industry averages for non-prim
Slide 30: Credit card portfolio
Credit card portfolio $23.6 billion credit card outstandings represent less than 3% of total loans $16.4 billion Community Bank $7.2 billion Wells Fargo Financial Significantly smaller portfolio than large bank peers Outstandings up 2% on lower payments Net charge-offs down modestly to 10.97% reflec
Slide 31: Auto portfolio
Auto portfolio Core Portfolio (1) Total outstandings up 5% QoQ reflecting "Cash for Clunkers" and continued market share gains Originations have higher down payments, higher FICOs and improved loan structures Net charge-offs down 5 bps QoQ, against seasonal trends, due to lower severity and improved
Slide 32: Tier 1 common equity reconciliation
Tier 1 common equity reconciliation