WELLS FARGO REPORTS 29 PERCENT INCREASE IN BOTH NET INCOME AND DILUTED EPS
SAN FRANCISCO — April 20, 1999
Wells Fargo's 1st quarter Financial Statements are available in Adobe Acrobat format. Click here to begin downloading.
First Quarter 1999 Highlights:
- Net Income up 29 percent from prior year
- Diluted Earnings Per Share up 29 percent from prior year
- Return on Assets (ROA) of 1.80 percent, Cash ROA of 2.17 percent
- Return on Common Equity (ROE) of 17.33 percent, Cash ROE of 34.38 percent
- Record Earnings for Norwest Mortgage
|Net Income (in millions)||$884||$684||29 %|
|Earnings per Common Share||0.53||0.42||26|
|Diluted Earnings per Common Share||0.53||0.41||29|
|Diluted Cash Earnings per Common Share*||0.61||0.50||22|
|Return on Assets||1.80 %||1.51 %||19|
|Return on Common Equity||17.33||14.20||22|
|Net Interest Margin||5.58||5.87||(5)|
*Cash earnings exclude goodwill and nonqualifying core deposit intangible amortization and balances.
Wells Fargo & Company (NYSE:WFC) today reported net income of $884million for the first quarter of 1999, compared with $684million for the first quarter of 1998, an increase of 29 percent. Diluted earnings per common share for the quarter were $.53, compared with $.41 for the first quarter of 1998, an increase of 29 percent. Return on average assets was 1.80 percent and return on average common equity was 17.33 percent for the first quarter of 1999, compared with 1.51 percent and 14.20 percent, respectively, for the first quarter of 1998.
Diluted cash earnings for the first quarter of 1999 were $.61 per share, compared with $.50 for the first quarter of 1998. Cash return on average assets was 2.17 percent and cash return on average tangible common equity was 34.38 percent for the first quarter of 1999, compared with 1.91 percent and 31.99 percent, respectively, for the first quarter of 1998. Cash earnings are earnings before the amortization of goodwill and nonqualifying core deposit intangible (related primarily to the 1996 acquisition of First Interstate Bancorp).
"We're very pleased with the company's financial performance in the first quarter," said Richard M. Kovacevich, Wells Fargo's president and chief executive officer. "Both net income and diluted earnings per share increased over 29 percent from the first quarter of 1998. We believe this financial performance is indicative of the progress so far in combining Wells Fargo and Norwest and is consistent with our earnings objectives. Thanks to the hard work of thousands of our team members across the franchise, our plan to integrate systems continues to be on schedule. We are taking a deliberate, measured approach with a goal of flawless execution."
On November2, 1998, Wells Fargo & Company (the former Wells Fargo) merged with WFC Holdings Corporation (WFC Holdings), a wholly-owned subsidiary of Norwest Corporation. In connection with the merger, Norwest Corporation changed its name to "Wells Fargo & Company." The merger was accounted for as a pooling of interests and, accordingly, the information included in this release presents the combined results of Wells Fargo & Company and its subsidiaries (the Company) as if the merger had been in effect for all periods presented.
Net Interest Income
Net interest income on a taxable-equivalent basis was $2,281million in the first quarter of 1999, compared with $2,210million for the same quarter a year ago. The Company's net interest margin for the first quarter of 1999 was 5.58 percent, compared with 5.87 percent in the same quarter of 1998. The decrease in the net interest margin was primarily due to lower yields on consumer and commercial loans as well as higher balances of lower yielding investment securities and mortgages held for sale, partially offset by decreased rates on consumer deposits.
Noninterest income in the first quarter of 1999 was $1,727 million, compared with $1,533 million in the same quarter of 1998. The increase was primarily due to net gains on sales of mortgages, net venture capital gains and higher trust and investment fees and commissions. A significant portion of the increase was offset by higher amortization of mortgage servicing rights.
Noninterest expense in the first quarter of 1999 was $2,342million, compared with $2,296million in the first quarter of 1998, an increase of 2 percent. The efficiency ratio was reduced to 58.7 percent for the first quarter of 1999, compared with 61.6 percent for the same quarter of 1998.
The loan loss provision was $270million for the first quarter of 1999, compared with $305million for the same period in 1998. Net charge-offs totaled $273 million, or 1.03 percent of average loans (annualized), in the first quarter of 1999. Net charge-offs totaled $310million, or 1.19 percent of average loans (annualized), for the first quarter of 1998.
At March 31, 1999, the allowance for loan losses of $3,161million was 2.92 percent of total loans, compared with 2.90 percent at December 31, 1998 and 2.92 percent at March 31, 1998. Total nonaccrual and restructured loans were $704million at March 31, 1999, compared with $710million at December 31, 1998 and $721million at March 31, 1998.
The Company has four lines of business for management reporting: Community Banking, Wholesale Banking, Norwest Mortgage, and Norwest Financial (Consumer Finance). The quarterly net income of the four business segments is shown in the following table:
Additional financial information on the business segments is provided on page 17 in this release.
Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including retail and trust services primarily in 21 midwestern and western states.
Community Banking reported earnings of $673 million in the first quarter of 1999, 26 percent above first quarter 1998 earnings of $535 million.
"It will be two years before our community banking stores are completely integrated, but we are already making progress with our sales efforts," said Les Biller, vice chairman and chief operating officer. "In January, we produced our first sales performance report for banking stores across our entire franchise. This abbreviated report ranks regions on three key sales measures, similar to the approach we have been using in the former Norwest banking states. We have started tracking partner referrals - the referrals our bankers make to mortgage, investment, insurance and trust and the referrals these businesses make to our bankers. We also have implemented minimum sales standards throughout our banking franchise. These standards are minimum sales goals for all of our bankers."
"We believe the winners in the financial services industry will be those who can generate the most revenue. We also recognize, however, that we have a lot of opportunities on the expense side. We are working on ways to reduce costs while maintaining our high quality customer service. We have started to introduce store productivity skills to the former Norwest banking states. These skills, developed by the old Wells Fargo, include staffing models that are now being tested in Norwest states."
Wholesale Banking serves businesses with annual sales in excess of $5 million and maintains relationships with major corporations throughout the United States. Wholesale Banking provides a complete line of commercial and corporate banking and real estate services.
Wholesale Banking reported earnings of $227 million in the first quarter of 1999, 3 percent above first quarter 1998 earnings of $221 million.
Senior managers of Wholesale Banking went on a 10-city, 14-event road show during the first quarter to educate Wholesale Banking team members about company products and cross-sell opportunities. "The new Wells Fargo has a much broader set of products than either Wells Fargo or Norwest had separately," said Dave Hoyt, group executive vice president of Wholesale Banking. "That is why we believe it is important for all of our people to understand the full array of products and services we are able to offer our wholesale customer." The group already is achieving increased sales referrals.
Norwest Mortgage is the largest originator of home mortgage loans in the United States and the second largest servicer of mortgage loans.
For the first quarter of 1999, Norwest Mortgage earned $69 million, 33 percent above first quarter 1998 earnings of $52 million. Selected quarterly Norwest Mortgage information follows:
|(dollars in billions)||3/31/99||12/31/98||3/31/98|
|Amortization of capitalized servicing rights (in millions)||294||215||153|
|Weighted average coupon||7.34 %||7.42 %||7.69 %|
|Capitalized servicing rights as a percentage of servicing portfolio||1.41||1.26||1.33|
In California, the nation's largest housing market, and in Washington, Oregon, Utah, Idaho, Nevada and Arizona, a growing number of Wells Fargo's banking stores now are staffed with Norwest Mortgage sales representatives on the sales floor serving the needs of customers. "We want our banking customers who need a mortgage to get it through Norwest Mortgage," said Mark Oman, group executive vice president of Mortgage and Home Equity. "We also want all of our mortgage customers in our banking states to bank with us."
Norwest Financial provides consumer finance and auto finance operations in 47 states, Canada, Latin America, Guam and Saipan.
Norwest Financial reported earnings of $54 million in the first quarter of 1999, 4 percent above the first quarter 1998 earnings of $52 million.
Norwest Financial had strong first quarter loan growth in the domestic core business, especially in the real-estate secured portfolio which was up 6 percent from fourth quarter 1998. "We are pleased with the continued credit quality improvement in our domestic business," said David Wood, chairman and chief executive officer of Norwest Financial.
Wells Fargo & Company is a $201 billion diversified financial services company providing banking, insurance, investments, mortgage and consumer finance through almost 6,000 stores and other distribution channels across North America, including all 50 states, and elsewhere internationally.
The following appears in accordance with the Securities Litigation Reform Act:
This press release (including information incorporated by reference in this press release) includes forward-looking statements about the Company's financial condition, results of operations, plans, objectives and future performance and business. These statements generally include the words "believe," "expect," "anticipate," "estimate," "may," "will" or similar expressions that suggest the statements are forward looking in nature.
These forward-looking statements involve inherent risks and uncertainties. The Company cautions readers that a number of factors-many of which are beyond the control of the Company-could cause actual results to differ materially from those in the forward-looking statements. Among these factors are changes in political and economic conditions, interest rate fluctuations, technological changes (including the "Year 2000" data systems compliance issue), customer disintermediation, competitive product and pricing pressures in the Company's geographic and product markets, equity and fixed income market fluctuations, personal and commercial customers' bankruptcies, inflation, changes in law, changes in fiscal, monetary, regulatory and tax policies, monetary fluctuations, credit quality and credit risk management, mergers and acquisitions, the integration of merged and acquired companies, and success in gaining regulatory approvals when required.
Also, actual results may differ materially from those in the forward-looking statements because of factors relating to the combination of the former Wells Fargo and the former Norwest Corporation, including the following: expected cost savings from the merger are not fully realized within the expected time frame or additional or unexpected costs are incurred; and costs or difficulties related to the integration of the former Wells Fargo and the former Norwest Corporation are greater than expected.