10-QPeriod: Q3 FY2011

WELLS FARGO & COMPANY/MN Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 8, 2011For Securities:WFCWFC-PDWFC-PCWFC-PYWFC-PAWFC-PLWFCNPWFC-PZ

Summary

Wells Fargo & Company (WFC) reported strong financial results for the quarter ended September 29, 2011, demonstrating resilience amidst a volatile economic environment. Net income reached a record $4.1 billion, a 21% increase year-over-year, driven by lower provisions for credit losses and reduced noninterest expenses, which more than offset a decline in total revenue. Diluted earnings per common share also saw a significant increase to $0.72, up 20% from the prior year. The company continued to exhibit solid growth in loans and core deposits, with deposits funding 111% of the loan portfolio. Credit quality showed improvement with lower net charge-offs and nonperforming assets, reflecting effective risk management and the continued integration of Wachovia. Capital levels remained robust, with the Tier 1 common equity ratio growing to 9.34%. The integration of Wachovia is progressing well, with retail banking store conversions completed and remaining integration activities expected by the first quarter of 2012. The company also highlighted its commitment to helping customers and the economy through various initiatives, including mortgage modifications and small business lending.

Financial Highlights

36 data points
Beta

Net Income

$4.05B

EPS (Diluted)

$0.72

Total Assets

$1.30T

Free Cash Flow

$9.23B

Financial Statements
Beta
Interest Expense$1.64B
Net Income$4.05B
EPS (Basic)$0.73
EPS (Diluted)$0.72
Shares Outstanding (Basic)5.28B
Shares Outstanding (Diluted)5.32B

Key Highlights

  • 1Record net income of $4.1 billion, up 21% year-over-year.
  • 2Diluted earnings per common share of $0.72, up 20% year-over-year.
  • 3Total loans increased to $760.1 billion, while average core deposits grew 8% year-over-year to $836.8 billion.
  • 4Provision for credit losses significantly decreased by $1.6 billion year-over-year.
  • 5Efficiency ratio improved to 59.5% from 61.2% in the prior year.
  • 6Tier 1 common equity ratio increased to 9.34%.
  • 7Completion of retail banking store conversions related to the Wachovia integration.

Frequently Asked Questions

The increase in Wells Fargo's net income was primarily driven by a significantly lower provision for credit losses, which decreased by $1.6 billion year-over-year, and a reduction in noninterest expenses. These factors more than offset a decline in total revenue.

Wells Fargo continues to improve its credit portfolio, evidenced by lower net charge-offs, reduced nonperforming assets, and stable delinquency trends. Key indicators monitored include loan concentrations, credit quality ratings, counterparty credit risk, economic and market conditions, and changes in interest rates. The company actively manages its non-strategic and liquidating portfolios, which have seen significant reductions.

The integration of Wachovia is progressing well, with all retail banking store conversions completed as of October 2011. The company expects remaining integration activities, including certain deposit, brokerage, and Wholesale Banking conversion events, to be completed by the first quarter of 2012.

Wells Fargo's capital levels remain strong. The Tier 1 common equity ratio grew to 9.34% of risk-weighted assets under Basel I, and the company estimates its Tier 1 common equity ratio was 7.41% under current Basel III capital proposals. Other regulatory capital ratios, including Tier 1 capital (11.26%) and Tier 1 leverage (8.97%), also remained strong.