10-QPeriod: Q3 FY2008

WELLS FARGO & COMPANY/MN Quarterly Report for Q3 Ended Sep 30, 2008

Filed October 30, 2008For Securities:WFCWFC-PDWFC-PCWFC-PYWFC-PAWFC-PLWFCNPWFC-PZ

Summary

Wells Fargo & Company (WFC) reported net income of $1.64 billion, or $0.49 per diluted share, for the third quarter of 2008. This represents a decrease compared to the $2.17 billion earned in the same period of the previous year. The decline was attributed to previously announced write-downs totaling $646 million related to investments in Fannie Mae, Freddie Mac, and Lehman Brothers, as well as an additional $247 million in other impairments. The company proactively increased its credit reserves by $500 million, bringing the total allowance for credit losses to $8.0 billion, reflecting continued weakness in the real estate and consumer credit markets. Despite these challenges, Wells Fargo demonstrated strong business momentum with double-digit growth in loans (up 15% year-over-year) and earning assets. Core deposits also saw significant growth (up 10% year-over-year). The net interest margin remained robust at 4.79%. Importantly, the company maintained strong capital ratios, with its Tier 1 capital ratio increasing to 8.59%, well above regulatory requirements. The report also highlights the pending acquisition of Wachovia Corporation, announced in October 2008, which is expected to close by the end of the year.

Financial Highlights

20 data points
Beta

Net Income

$1.64B

EPS (Diluted)

$0.49

Free Cash Flow

-$576.00M

Financial Statements
Beta
Interest Expense$2.39B
Net Income$1.64B
EPS (Basic)$0.49
EPS (Diluted)$0.49
Shares Outstanding (Basic)3.32B
Shares Outstanding (Diluted)3.33B

Key Highlights

  • 1Net income for Q3 2008 was $1.64 billion ($0.49/share), down from $2.17 billion ($0.64/share) in Q3 2007.
  • 2The company recorded $646 million in impairments on Fannie Mae, Freddie Mac, and Lehman Brothers investments, plus an additional $247 million in other impairments.
  • 3Allowance for credit losses increased by $500 million to $8.0 billion, reflecting concerns about consumer and commercial real estate credit quality.
  • 4Loans grew 15% year-over-year to $404.2 billion on average, and core deposits grew 10% year-over-year to $334.1 billion.
  • 5Net interest margin remained strong at 4.79%.
  • 6Tier 1 capital ratio improved to 8.59% from 8.24% at the end of 2007.
  • 7Wells Fargo announced its agreement to acquire Wachovia Corporation, expected to close by the end of 2008.

Frequently Asked Questions

Wells Fargo reported net income of $1.64 billion for the third quarter of 2008, which translated to $0.49 per diluted share. This is a decrease from the $2.17 billion in net income and $0.64 per diluted share reported in the third quarter of 2007.

The decline in net income was primarily due to significant write-downs on investments, including $646 million related to Fannie Mae, Freddie Mac, and Lehman Brothers, along with an additional $247 million in other impairments. Additionally, the company increased its provision for credit losses by $500 million to $8.0 billion, reflecting concerns about deteriorating credit conditions in certain portfolios.

The company experienced strong growth in its loan portfolio, with average loans increasing by 15% year-over-year to $404.2 billion. Core deposits also showed robust growth, increasing by 10% year-over-year to $334.1 billion at the end of the quarter. The net interest margin remained strong at 4.79%.

Wells Fargo announced in October 2008 that it had signed a definitive agreement to acquire Wachovia Corporation in a stock-for-stock transaction. The merger is subject to shareholder approval and was expected to be completed by the end of 2008.