Wells Fargo 2008 Annual Report Download - page 36

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Wells Fargo & Company is a $1.3 trillion diversified financial
services company providing banking, insurance, investments,
mortgage banking, investment banking, retail banking,
brokerage and consumer finance through banking stores,
the internet and other distribution channels to consumers,
businesses and institutions in all 50 states and in other
countries. We ranked fourth in assets and first in market
value of our common stock among our peers at December 31,
2008. 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.
We reported diluted earnings per common share of $0.70
for 2008 compared with $2.38 for 2007. Net income was
$2.66 billion for 2008 compared with $8.06 billion for 2007.
Net income for 2008 included an $8.14 billion (pre tax) credit
reserve build, $2.01 billion (pre tax) of other-than-temporary
impairment and $124 million (pre tax) of merger-related expenses.
On December 31, 2008, Wells Fargo acquired Wachovia
Corporation (Wachovia). Because the acquisition was com-
pleted at the end of 2008, Wachovia’s results are not included
in the income statement, average balances or related metrics
for 2008. Wachovia’s assets and liabilities are included in the
consolidated balance sheet at December 31, 2008, at their
respective acquisition date fair values.
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 prod-
ucts that fulfill their needs. Our cross-sell strategy and diver-
sified 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. We continued
to earn more of our customers’ business in 2008 in both our
retail and commercial banking businesses.
Despite the unprecedented contraction in the credit mar-
kets, we continued to lend to credit-worthy customers. We
made $106 billion in new loan commitments during 2008 to
consumer, small business and commercial customers and
originated $230 billion of residential mortgages. The funda-
mentals of our time-tested business model are as sound as
ever. During fourth quarter 2008, our average core deposits
grew an impressive 31% (annualized) over the prior quarter.
Our cross-sell set records for the 10th consecutive year—our
average retail banking household now has 5.73 products, one
of every four has eight or more products, 6.4 products for
Wholesale Banking customers, and our average middle-mar-
ket commercial banking customer has almost eight products.
Business banking cross-sell reached 3.61 products. Our goal
is eight products per customer, which is currently half of our
estimate of potential demand. We were able to increase our
lending to creditworthy customers because we were building
capital and shrinking our balance sheet in 2005 and 2006,
when credit spreads were unrealistically low and were not
priced for their underlying risk. We did make some mistakes,
but for the most part, we maintained our credit discipline. We
understand our customers’ financial needs. As a result, our
company at year-end 2008 was one of the world’s strongest
financial institutions. At February 23, 2009, Wells Fargo
Bank, N.A. has the highest credit rating currently given to
U.S. banks by Moody’s Investors Service, “Aa1,” and Standard
& Poor’s Ratings Services, “AA+.”
WACHOVIA MERGER On December 31, 2008, Wachovia
merged into Wells Fargo & Company with Wells Fargo
surviving the merger. Wachovia, based in Charlotte, North
Carolina, was one of the nation’s largest diversified financial
services companies, providing a broad range of retail banking
and brokerage, asset and wealth management, and corporate
and investment banking products and services to customers
through 3,300 financial centers in 21 states from Connecticut
to Florida and west to Texas and California, and nationwide
retail brokerage, mortgage lending and auto finance businesses.
In the merger, Wells Fargo exchanged 0.1991 shares of its
common stock for each outstanding share of Wachovia
common stock, issuing a total of 422.7 million shares of
Wells Fargo common stock with a December 31, 2008, value
of $12.5 billion to Wachovia shareholders. Shares of each out-
standing series of Wachovia preferred stock were converted
into shares (or fractional shares) of a corresponding series of
Wells Fargo preferred stock having substantially the same
rights and preferences. Wachovia’s assets and liabilities are
included in the consolidated balance sheet at their respective
acquisition date fair values. Wachovia’s year-end assets at
fair value totaled $707 billion. Because the acquisition was
completed at the end of 2008, Wachovia’s results of opera-
tions are not included in our income statement. Based on the
purchase price of $23.1 billion and the fair value of net assets
acquired of $14.3 billion, the transaction resulted in goodwill
of $8.8 billion, which will change as acquisition date fair values
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