WELLS FARGO REPORTS RECORD NET INCOME OF $3.75 BILLION
SAN FRANCISCO — January 18, 2000
Wells Fargo's 4th quarter Financial Statements are available in Adobe Acrobat format. Click here to begin downloading. To receive a copy of this Release by mail, call 415-396-0560.
- Record Net Income of $3.75 billion, up 29% from prior year**
- Record Diluted Earnings Per Share of $2.23, up 27% from prior year**
- Return on Assets (ROA) of 1.85 percent, Cash ROA of 2.22 percent
- Return on Common Equity (ROE) of 17.66 percent, Cash ROE of 34.08 percent
|Full Year % Change from 1999||Full Year % Change from 1998**||Fourth Quarter % Change from 1999||Fourth Quarter % Change from 1998**|
|Net Income (in millions)||$3,747||29 %||$970||27 %|
|Diluted Earnings per Common Share||$2.23||27 %||$.58 26||26 %|
|Diluted Cash Earnings per Common Share*||$2.56||23 %||$.68||26 %|
|Return on Assets||$1.85||20 %||$1.85||21 %|
|Return on Common Equity||$17.66||22 %||$17.84||25 %|
|Efficiency Ratio||$58.3||(5) %||$59.5||(1) %|
|Net Interest Margin||$5.66||(2) %||$5.61||-- %|
*Cash earnings exclude goodwill and nonqualifying core deposit intangible amortization and balances.
**Percentage change from 1998 for all results except the net interest margin are before 4Q98 merger-related and other charges of approximately $1.15 billion and a provision for loan losses of approximately $320 million, mostly in Island Finance.
Wells Fargo & Company (NYSE:WFC) today reported record net income of $970 million for the fourth quarter of 1999, compared with a loss of $194 million for the fourth quarter of 1998. Net income for the full year of 1999 was a record $3,747million, compared with $1,950 million a year ago. Diluted earnings (loss) per common share were a record $.58 for the fourth quarter of 1999 and a record $2.23 for the full year of 1999, compared with $(.12) and $1.17 for the same periods of 1998. Earnings for the fourth quarter of 1998 were affected by merger-related and other charges of approximately $1.15 billion and a provision for loan losses of approximately $320million above the level of prior quarters primarily due to loan losses in Island Finance.
Return on average assets (ROA) was 1.85percent for both the fourth quarter and the full year of 1999. Return on average common equity (ROE) was 17.84percent for the fourth quarter of 1999 and 17.66percent for the full year of 1999. Excluding the fourth quarter 1998 charges and provision mentioned above, ROA and ROE would have been 1.53percent and 14.32percent, respectively, for the fourth quarter of 1998. ROA and ROE would have been 1.54percent and 14.52percent, respectively, for the full year of 1998.
Diluted cash earnings (loss) were a record $.68per share for the fourth quarter of 1999 and a record $2.56per share for the full year of 1999, compared with ($.04)per share and $1.50per share for the same periods of 1998. Excluding the fourth quarter 1998 charges and provision mentioned above, diluted cash earnings would have been $.54 for the fourth quarter of 1998 and $2.08 for the full year 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). Cash return on average assets was 2.24percent for the fourth quarter of 1999 and 2.22percent for the full year of 1999. Cash return on average tangible common equity was 34.20percent for the fourth quarter of 1999 and 34.08percent for the full year of 1999. Excluding the fourth quarter 1998 charges and provision mentioned above, cash ROA and cash ROE would have been 1.88percent and 28.94percent for the fourth quarter of 1998, respectively. For the full year of 1998, cash ROA and cash ROE would have been 1.92percent and 31.76percent, respectively.
"We're pleased to report that the first full year of the merger of equals of Norwest and Wells Fargo has been a great success and that we've met the three key expectations stated at the time the merger was announced," said Dick Kovacevich, president and chief executive officer. "First, diluted earnings per share for 1999 is in line with projections we announced at the time of the merger and up 27 percent for the year excluding the 1998 merger-related and other charges. Second, we are already experiencing some revenue and cross-sell momentum. Total revenues were up 16 percent for the fourth quarter and 9percent for the full year. As a diversified financial services company, not just a bank, we're earning more of the business from our current customers and we're attracting new customers. Third, we've been faithful to our commitment to begin every decision with our customers' best interests in mind. To deliver outstanding customer service, our merger integration process has been careful and deliberate. We converted two banking states and 450,000 banking households to common systems in 1999. Our plans are on schedule for 40separate systems conversions in 2000 including systems integrations in 19 banking states, acquisitions, and new product introductions. We also made all of our systems Y2K compliant. The credit for all these 1999 successes in earnings, revenue growth and systems conversions goes to our 102,000 talented team members who are focused on our vision of satisfying all our customers' financial needs and helping them succeed financially. They're simply the best."
"The $.68 diluted cash earnings per share reported for the fourth quarter of 1999 roughly reflect the core operating performance of the company," said Rod Jacobs, vice chairman and chief financial officer. "Venture capital gains of $721 million included a $560million gain on our investment in Cerent Corporation. Among other items, offsets included $260million of losses in conjunction with restructuring our investment securities portfolio, $55million of expenditures for store platform conversions, $51 million of auto lease residual write-downs and $34 million of additional expenditures in the fourth quarter, primarily for Internet and other technology investments."
"We continue to grow and invest in the Internet," said Clyde Ostler, group executive vice president of Internet Services Group. "The Internet continues to play an increasingly important role in the way Wells Fargo delivers financial services. We now have more customers banking on the Internet with Wells Fargo than any other bank in the country, 1.4million, double that of year end 1998. Approximately one out of every five of our checking account customers uses the Internet channel to do some of their banking. This growth was particularly strong in the former Norwest banking states where online customers grew from 34,000 to 228,000."
"We have established dedicated teams to more rapidly develop our Internet offerings for small business, commercial customers and brokerage and investments customers," Ostler said, "and continue to enhance our offering for retail banking."
Net Interest Income
Net interest income on a taxable-equivalent basis was $2,412 million in the fourth quarter of 1999, compared with $2,315 million for the same quarter a year ago and $9,419 million for the full year of 1999, compared with $9,049 million in 1998. The net interest margin was 5.61 percent for the fourth quarter of 1999 and 5.66 percent for the full year of 1999, compared with 5.60 percent and 5.79 percent for the same periods of 1998.
"The margin decline from 5.73 percent in the third quarter of 1999 to 5.61 percent in the fourth quarter of 1999 was due primarily to the impact of actions taken to prepare for Y2K," said Jacobs. "These actions reduced the net interest margin by 7 basis points during the quarter. However, strong loan growth of 4 percent from September30, 1999 offset the lower margin impact on net interest income."
Noninterest income in the fourth quarter of 1999 was $2,071 million, compared with $1,557 million in the same quarter of 1998, an increase of 33 percent. For the full year of 1999, noninterest income was $7,420 million, compared with $6,427 million in 1998, an increase of 15 percent. The majority of the increase for the fourth quarter of 1999 was due to the non-cash venture capital gain of about $560 million related to the Company's venture capital investment in Cerent Corporation, partially offset by a loss on the sales of investment securities and a write-down of auto lease residuals.
Noninterest expense was $2,657 million in the fourth quarter of 1999, compared with $3,482 million in the same quarter of 1998, a decrease of 24 percent. For the full year of 1999, noninterest expense was $9,782 million, compared with $10,579 million in 1998, a decrease of 8 percent. The decrease in noninterest expense for the fourth quarter of 1999 was due to fourth quarter 1998 merger-related and other charges of approximately $1.15 billion, partly offset by $55 million of expenditures for store platform conversions in the fourth quarter of 1999, along with $34 million of additional expenditures, primarily for Internet and other technology investments and $40 million of asset write-downs.
The provision for loan losses was $275 million for the fourth quarter of 1999, compared with $624 million for the same period in 1998. Net charge-offs totaled $274 million, or .93 percent of average loans (annualized), in the fourth quarter of 1999. Net charge-offs totaled $686 million, or 2.56 percent of average loans (annualized), for the fourth quarter of 1998, including the $320 million in Island Finance. For the year ended December 31, 1999, the loan loss provision was $1,045 million and net charge-offs totaled $1,049 million, or .94 percent of average loans, compared with a loan loss provision of $1,545 million and net charge-offs of $1,617 million, or 1.52 percent of average loans for the full year of 1998.
At December 31, 1999, the allowance for loan losses of $3,170million was 2.65percent of total loans, compared with 2.90percent at December31,1998. Total nonaccrual and restructured loans were $669million at December 31, 1999, compared with $710million at December31,1998.
Wells Fargo has four lines of business for management reporting: Community Banking, Wholesale Banking, Norwest Mortgage, and Norwest Financial (Consumer Finance). Net income (loss) of the four business segments was:
Community Bankingoffers a complete line of diversified financial products and services for consumers and small businesses including investment, insurance and trust services primarily in 21 midwestern and western states.
"We're delivering solid earnings growth in Community Banking by leveraging the strengths of each of our former companies, retaining our talented team members, and executing a near flawless integration of common systems on a state by state basis," said Les Biller, vice chairman and chief operating officer. "This is a tribute to the outstanding energy and effort of our team members throughout our 21 banking states."
Biller added, "I am particularly pleased with the continued focus on developing our sales culture. Sales productivity and profitability statistics consistently improved throughout the year. As a result, we are realizing good sales growth. For example, in California, our largest state and the seventh largest economy in the world on a standalone basis, the sale of core financial products increased almost 15 percent from the fourth quarter of 1998 to the fourth quarter of 1999."
"Our home equity product is one of our most popular products. Home equity product sales for the entire company increased 40 percent during 1999, with outstanding balances rising 16 percent during 1999. During the year, Wells Fargo strengthened its position as the second largest originator of home equity lines and loans and its leadership on the Internet by launching instant decisions for home equity applications nationally."
Wholesale Bankingserves businesses with annual sales in excess of $10 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 $209 million in the fourth quarter of 1999, 27percent above fourth quarter 1998 earnings of $164 million. For the full year 1999, earnings were 9 percent higher than in 1998.
"We're pleased with the performance of Wholesale Banking in 1999 and the momentum we have going into 2000," said Dave Hoyt, group executive vice president for Wholesale Banking. "Looking forward, we will continue to focus on acquiring new customers and capitalizing on the cross-sell opportunities we have as a result of bringing Wells Fargo and Norwest together."
Norwest Mortgageis the second largest originator and servicer of home mortgage loans in the United States.
Norwest Mortgage reported earnings of $70 million in the fourth quarter of 1999, 25 percent above fourth quarter 1998 earnings of $56 million. For the full year 1999, earnings were 28 percent higher than in 1998.
|(dollars in billions)||12/31/99||9/30/99||6/30/99||3/31/99||12/31/98|
|Quarter||$ 13||$ 19||$ 23||$ 28||$ 35|
|Year to date||82||69||50||28||109|
|Amortization of capitalizedservicing rights (in millions):|
|Year to date||683||599||460||294||786|
|Weighted average coupon||7.33||7.30||7.30||7.34||7.42|
|Capitalized servicing rights as apercentage of servicingportfolio||1.60||1.58||1.53||1.41||1.26|
"The hard work of the Norwest Mortgage team members has resulted in outstanding growth over the last ten years," said Mark Oman, group executive vice president, Mortgage and Home Equity Group. "We've increased stores from 180 in 35states to 530 mortgage stores in all 50 states and now have a presence in 585 Wells Fargo / Norwest bank stores nationwide. Originations have increased from $4.4 billion in 1989 to $82.0 billion in 1999 and we grew the servicing portfolio from $800 million to $280billion. Most impressive has been the increase in earnings from $6 million in 1989 to a record $277 million in 1999. During this period, which includes periods of both high and low rates, our balance between production and servicing has allowed us to record nine consecutive years of record earnings."
Oman added, "Norwest Mortgage is excited about the opportunities that the merger with Wells Fargo has presented to enter new markets and gain new customers. During 1999 we have added new stores and new sales representatives in these new markets. We see more opportunities to locate more mortgage representatives in our banks and to continue to develop our cross-sell processes."
Norwest Financialoffers consumer finance and auto finance in 47 states, Canada, the Caribbean and Latin America.
"The operating performance of Norwest Financial continues to improve, reflecting solid loan growth and better asset quality in our U.S. operations," said Dan Porter, new chairman and chief executive officer of Norwest Financial. "We strive to be innovative and develop new products to better serve our customers' needs -- when, where and how they want to be served. An example is our Cash on Demand loans which use ATMs to provide cash advances to our customers. As a result of new product introductions, and good growth in our existing products, loans in our core U.S. consumer finance business grew approximately 10 percent during 1999."
Wells Fargo & Company and subsidiaries (the Company) is a $218 billion diversified financial services company providing banking, insurance, investments, mortgage and consumer finance through about 6,000 stores, the Internet and other distribution channels across North America, including all 50 states, and elsewhere internationally.
On November 2, 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 the Company as if the merger had been in effect for all periods presented.
The following appears in accordance with the Private Securities Litigation Reform Act of 1995:
This press release (including information incorporated by reference in this press release) may contain forward-looking statements about the Company, including descriptions of plans or objectives of its management for future operations, products or services, and forecasts of its revenues, earnings or other measures of economic performance. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words "believe," "expect," "anticipate," "intend," "plan," "estimate" or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could" or "may."
Forward-looking statements, by their nature, are subject to risks and uncertainties. A number of factors -- many of which are beyond the Company's control -- could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. The Company's reports filed with the Securities and Exchange Commission, including the Company's Form 10-Q for the quarter ended September 30, 1999, describe some of these factors, including certain credit, market, operational, liquidity, interest rate, and Year 2000 risks associated with the Company's business and operations. Other factors described in the Company's September30,1999 Form 10-Q include changes in business and economic conditions, competition, fiscal and monetary policies, disintermediation, legislation including the Gramm-Leach-Bliley Act of 1999, the combination of the former Norwest Corporation and the former Wells Fargo & Company, and other mergers and acquisitions.
There are other factors besides these that could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements or otherwise affect in the future the Company's business, results of operations and financial condition.