10-QPeriod: Q2 FY2011

WELLS FARGO & COMPANY/MN Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 5, 2011For Securities:WFCWFC-PDWFC-PCWFC-PYWFC-PAWFC-PLWFCNPWFC-PZ

Summary

Wells Fargo & Company (WFC) reported a strong second quarter in 2011, with net income up 29% year-over-year to $3.9 billion and diluted earnings per common share increasing by 27% to $0.70. This robust performance was driven by solid contributions across all three of its main business segments: Community Banking, Wholesale Banking, and Wealth, Brokerage and Retirement. The company continued to benefit from a improving credit quality, with lower net charge-offs and nonperforming assets, reflecting the ongoing integration of the Wachovia acquisition and a reduction in non-strategic loan portfolios. From a balance sheet perspective, core deposits continued to grow, funding a larger portion of the loan portfolio, and capital ratios remained strong, with the Tier 1 common equity ratio reaching 9.15%. Wells Fargo also actively managed its capital by redeeming trust preferred securities and restarting its common stock repurchase program. Despite a slight year-over-year decline in total revenue, primarily due to lower mortgage banking income and service charges on deposits, the company demonstrated effective cost management and a strategic focus on cross-selling, which are expected to support future growth.

Financial Highlights

36 data points
Beta

Net Income

$3.95B

EPS (Diluted)

$0.70

Total Assets

$1.26T

Free Cash Flow

$11.35B

Financial Statements
Beta
Interest Expense$1.71B
Net Income$3.95B
EPS (Basic)$0.70
EPS (Diluted)$0.70
Shares Outstanding (Basic)5.29B
Shares Outstanding (Diluted)5.33B

Key Highlights

  • 1Net income increased 29% year-over-year to $3.9 billion, or $0.70 per diluted share, up 27% from the prior year.
  • 2Credit quality continued to improve, with a significant decline in net charge-offs and nonperforming assets, reflecting the benefit of shedding non-strategic loan portfolios.
  • 3Total revenue was $20.4 billion, a 5% decrease year-over-year, primarily due to lower mortgage banking income and reduced service charges on deposits.
  • 4Noninterest expense decreased 2% year-over-year to $12.5 billion, with ongoing efforts to manage expenses and achieve integration synergies from the Wachovia merger.
  • 5Average core deposits grew 6% year-over-year to $807.5 billion, continuing to fund a larger portion of the loan portfolio.
  • 6Capital ratios remained strong, with the Tier 1 common equity ratio at 9.15% and total capital ratio at 15.41%, reflecting strong internal capital generation.
  • 7Wells Fargo redeemed $3.4 billion of trust preferred securities and repurchased 35 million shares of common stock, demonstrating capital management actions.

Frequently Asked Questions

Wells Fargo reported a strong financial performance in the second quarter of 2011, with net income rising 29% year-over-year to $3.9 billion, and diluted earnings per common share increasing by 27% to $0.70. This growth was driven by improved credit quality, strong deposit growth, and effective expense management.

The integration of Wachovia continued to progress well. Wells Fargo reported that business and revenue synergies were exceeding expectations. By the end of the quarter, 83% of their banking customers were on a single deposit system, with further retail banking store conversions scheduled for completion by year-end 2011.

Credit quality continued to improve significantly. Net charge-offs and nonperforming assets declined sequentially and year-over-year. The company noted that absent significant economic deterioration, they expect future allowance for credit loss releases.

Wells Fargo continued to build capital, with total stockholders' equity increasing. Key capital ratios, including Tier 1 common equity, remained strong and improved from the previous year. The company also took actions such as redeeming trust preferred securities and repurchasing common stock, indicating active capital management.