10-QPeriod: Q1 FY2012

WELLS FARGO & COMPANY/MN Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 8, 2012For Securities:WFCWFC-PDWFC-PCWFC-PYWFC-PAWFC-PLWFCNPWFC-PZ

Summary

Wells Fargo & Company (WFC) reported a strong first quarter of 2012, with net income of $4.2 billion, a 13% increase year-over-year, and diluted earnings per share of $0.75, up 12% year-over-year. This marks the ninth consecutive quarter of earnings per share growth. Total revenue increased 6% to $21.6 billion, driven primarily by a significant increase in mortgage banking net gains, benefiting from a low interest rate environment that boosted loan applications and margins. The company demonstrated improved credit quality, with net charge-offs falling to 1.25% of average loans, the lowest rate since 2007. Nonaccrual loans saw an increase, largely due to a regulatory guidance change for junior lien mortgages, but excluding this impact, nonaccrual loans declined. Capital ratios remained robust, with Tier 1 common equity increasing to 9.98% under Basel I. The company also increased its common stock dividend by 83% to $0.22 per share.

Financial Highlights

36 data points
Beta

Net Income

$4.25B

EPS (Diluted)

$0.75

Total Assets

$1.33T

Free Cash Flow

$15.90B

Financial Statements
Beta
Interest Expense$1.37B
Net Income$4.25B
EPS (Basic)$0.76
EPS (Diluted)$0.75
Shares Outstanding (Basic)5.28B
Shares Outstanding (Diluted)5.34B

Key Highlights

  • 1Net income of $4.2 billion, up 13% year-over-year.
  • 2Diluted earnings per share of $0.75, up 12% year-over-year, marking the ninth consecutive quarter of EPS growth.
  • 3Total revenue of $21.6 billion, up 6% year-over-year, driven by strong mortgage banking gains.
  • 4Net charge-off rate improved to 1.25% of average loans, the lowest since 2007.
  • 5Tier 1 common equity ratio improved to 9.98% (Basel I).
  • 6Quarterly common stock dividend increased by 83% to $0.22 per share.
  • 7Core deposits grew 9% year-over-year, funding a larger portion of the loan portfolio.

Frequently Asked Questions

Wells Fargo's revenue increased by 6% to $21.6 billion primarily due to higher noninterest income, particularly a significant rise in net gains on mortgage loan origination and sales activities. This surge was fueled by the prevailing low interest rate environment, which led to increased mortgage applications and improved origination margins.

Credit quality showed improvement, with net charge-offs declining to 1.25% of average loans, the lowest level recorded since 2007. While total nonperforming assets increased due to a regulatory change impacting junior lien mortgage classifications, actual nonaccrual loans (excluding that impact) declined across all portfolios.

Noninterest expense increased by 2% year-over-year, partly due to higher personnel and employee benefit expenses. However, the company reported that integration expenses related to the Wachovia merger were lower year-over-year, and the efficiency ratio improved to 60.1% due to ongoing cost-saving initiatives and the completion of integration activities.

Wells Fargo continued to build its capital base, with total equity increasing to $146.8 billion. The Tier 1 common equity ratio strengthened to 9.98% (Basel I). In a demonstration of confidence in its capital position and earnings, the company increased its quarterly common stock dividend by 83% to $0.22 per share.