Wells Fargo 2007 Annual Report Download - page 37

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Wells Fargo & Company is a $575 billion diversified finan-
cial services company providing banking, insurance, invest-
ments, mortgage banking and consumer finance through
banking stores, the internet and other distribution channels
to consumers, businesses and institutions in all 50 states of
the U.S. and in other countries. We ranked fifth in assets and
fourth in market value of our common stock among U.S.
bank holding companies at December 31, 2007. When we
refer to “the Company,” “we,” “our” or “us” in this
Report, we mean Wells Fargo & Company and Subsidiaries
(consolidated). When we refer to “the Parent,” we mean
Wells Fargo & Company.
The financial services industry faced unprecedented chal-
lenges in 2007. Home values declined abruptly and sharply,
adversely impacting the consumer lending business of many
financial service providers; credit spreads widened as the
capital markets repriced in many asset classes; price volatility
increased and market liquidity decreased in several sectors of
the capital markets; and, late in the year, economic growth
declined sharply.
We were not immune to these unprecedented external
factors. Our provision for credit losses was $2.7 billion higher
in 2007 than in 2006, reflecting $1.3 billion in additional
provisions for actual charge-offs that occurred in 2007 and
a special $1.4 billion provision to further build reserves for
loan losses.
While the $2.7 billion in additional provisions reduced
consolidated net income after tax by 18%, consolidated
full-year earnings per share declined only 4% to $2.38 per
share, a strong overall result given the external environment
and higher credit costs.
Our results were as strong as they were because we largely
avoided or had negligible exposure to many of the problem
areas that resulted in significant costs and write-downs at other
large financial institutions and because we continued to build
our diversified franchise throughout 2007, once again achiev-
ing growth rates, operating margins, and returns at or near the
top of the financial services industry, while at the same time
maintaining strong capital levels and strong liquidity.
Our vision is to satisfy all our customers’ financial needs,
help them succeed financially, be recognized as the premier
financial services company in our markets and be one of
America’s great companies. Our primary strategy to achieve
this vision is to increase the number of products our cus-
tomers buy from us and to give them all of the financial
products that fulfill their needs. Our cross-sell strategy and
diversified business model facilitate growth in strong and
weak economic cycles, as we can grow by expanding the
number of products our current customers have with us.
Despite the aforementioned challenges, we continued to earn
more of our customers’ business in 2007 in both our retail
and commercial banking businesses. Our cross-sell set
records for the ninth consecutive year—our average retail
banking household now has 5.5 products, almost one in five
have more than eight, 6.1 for Wholesale Banking customers,
and our average middle-market commercial banking cus-
tomer has almost eight products. Business banking cross-sell
reached 3.5 products. Our goal in each customer segment is
eight products per customer, which is currently half of our
estimate of potential demand.
Revenue, the sum of net interest income and noninterest
income, grew 10.4% to a record $39.4 billion in 2007 from
$35.7 billion in 2006. The breadth and depth of our busi-
ness model resulted in very strong and balanced growth in
loans, deposits and fee-based products. Many of our busi-
nesses continued to post double-digit, year-over-year revenue
growth, including business direct, wealth management, credit
and debit card, global remittance services, personal credit
management, home mortgage, asset-based lending, asset
management, specialized financial services and international.
Among the many products and services that grew in
2007, we achieved the following results:
• Average loans grew by 12%;
• Average core deposits grew by 13%;
• Assets under management were up 14%;
• Mortgage servicing fees were up 14%;
• Insurance premiums were up 14%; and
• Total noninterest income rose 17%,
reflecting the breadth of our cross-sell efforts.
We continue to maintain leading market positions in
deposits in many communities within our banking footprint
and to be #1 in many categories of financial services nation-
ally, including small business lending, retail mortgage origi-
nations, agricultural lending, internet banking, insurance
brokerage among banks, and provider of financial services to
middle-market companies in the western U.S.
We have stated in the past that to consistently grow over
the long term, successful companies must invest in their core
businesses and maintain strong balance sheets. We continued
to make investments in 2007 by opening 87 regional bank-
ing stores and converting 42 stores acquired from Placer
Sierra Bancshares and National City Bank to our network.
We grew our sales and service force by adding 1,755 team
members (full-time equivalents) in 2007, including 578 retail
Overview
This Annual Report, including the Financial Review and the Financial Statements and related Notes, has forward-looking
statements, which may include forecasts of our financial results and condition, expectations for our operations and business,
and our assumptions for those forecasts and expectations. Do not unduly rely on forward-looking statements. Actual results may
differ significantly from our forecasts and expectations due to several factors. Please refer to the “Risk Factors” section of this
Report for a discussion of some of the factors that may cause results to differ.
Financial Review