WELLS FARGO REPORTS 30 PERCENT INCREASE IN NET INCOME
SAN FRANCISCO — October 19, 1999
Wells Fargo's 3rd quarter Financial Statements are available in Adobe Acrobat format. Click here to begin downloading.
Third Quarter 1999 Highlights:
- Record Net Income up 30 percent from prior year
- Record Diluted Earnings Per Share up 27 percent from prior year
- Return on Assets (ROA) of 1.88 percent, Cash ROA of 2.24 percent
- Return on Common Equity (ROE) of 17.97 percent, Cash ROE of 34.33 percent
- Record Earnings for Community Banking
- Integration on Schedule -- successful conversion to common systems in New Mexico
|Third Quarter % Change from 1999||Third Quarter % Change from 1998||Year to Date % Change from 1999||Year to Date % Change from 1998|
|Net Income (in millions)||$962||30 %||2,777||30 %|
|Diluted Earnings per Common Share||.57||27||1.65||28|
|Diluted Cash Earnings per Common Share*||.65||23||1.89||22|
|Return on Assets||1.88||19||1.85||19|
|Return on Common Equity||17.97||22||$17.60||21|
|Net Interest Margin||5.73||(3)||5.67||(3)|
*Cash earnings exclude goodwill and nonqualifying core deposit intangible amortization and balances.
Wells Fargo & Company (NYSE:WFC) today reported record net income of $962 million for the third quarter of 1999, compared with $742 million for the third quarter of 1998, an increase of 30 percent. Net income for the first nine months of 1999 was a record $2,777 million, an increase of 30 percent over the same period a year ago. Diluted earnings per common share were a record $.57 for the third quarter of 1999 and a record $1.65 for the first nine months of 1999, compared with $.45 and $1.29 for the same periods of 1998. Return on average assets was 1.88 percent for the third quarter of 1999 and 1.85 percent for the first nine months of 1999, compared with 1.58 percent and 1.55 percent for the same periods a year ago. Return on average common equity was 17.97 percent for the third quarter of 1999 and 17.60 percent for the first nine months of 1999, compared with 14.72 percent and 14.55 percent for the same periods of 1998.
Diluted cash earnings were a record $.65 per share for the third quarter of 1999 and a record $1.89 per share for the first nine months of 1999, compared with $.53 per share and $1.55 per share for the same periods of 1998. Cash return on average assets was 2.24percent for the third quarter of 1999 and 2.22percent for the first nine months of 1999, compared with 1.97percent and 1.95percent for the same periods a year ago. Cash return on average tangible common equity was 34.33percent for the third quarter of 1999 and 34.04percent for the first nine months of 1999, compared with 31.47percent and 32.02percent for the same periods 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).
"The successful merger of equals of Norwest and Wells Fargo and the complementary strengths of both organizations now have produced impressive earnings momentum across our new company for the third consecutive quarter," said Dick Kovacevich, president and chief executive officer. "Were particularly pleased with the virtually flawless conversion to common systems that our team members achieved recently for our 170,000 banking households in New Mexico, the first of our 21 banking states to convert the next year and a half."
"Because were combining the best of both systems, we believe this is the most complex conversion in banking history," said Kovacevich. "We intend also to make it the most successful. Were on schedule to convert our banking systems in Nevada later this month for our 275,000 banking households in that state and we began the first stage of our Arizona conversion before the required Y2K freeze took effect. Were on schedule to complete all our state conversions by the first quarter of 2001. Its testimony to the hard work and customer focus of our entire team that during this merger integration, Fortune magazine, based on a survey of our competitors management and outside directors, ranked us the worlds second most admired commercial bank."
During the quarter, Wells Fargo became the first in the industry to reach a million Internet banking customers, and is adding more than 100,000 customers each month, more than two every minute. "We continue to strive to become the best provider of online financial services across all our business lines by offering value-added, integrated, multi-channel solutions for our customers," said Clyde Ostler, head of Wells Fargos Internet Services Group.
"Recently, we rolled out our real-time home equity credit decision capability to our Norwest customers and nationally through Wells Fargo Online," said Ostler. "Individuals who own property anywhere in the United States can apply for home equity loans and lines with Wells Fargo. We also introduced One Stop eStore service to help small and midsize businesses build online storefronts."
Net Interest Income
Net interest income on a taxable-equivalent basis was $2,399 million in the third quarter of 1999, compared with $2,278 million for the same quarter a year ago and $7,007 million for the first nine months of 1999, compared with $6,734 million for the same period a year ago. The net interest margin was 5.73 percent for the third quarter of 1999 and 5.67 percent for the first nine months of 1999, compared with 5.88 percent and 5.86 percent in the same periods of 1998. The decrease in the net interest margin for both the third quarter and the first nine months was primarily due to higher balances of lower yielding investment securities and lower yields on consumer loans and commercial real estate mortgages partially offset by decreased rates on consumer deposits.
Noninterest income in the third quarter of 1999 was $1,809 million, compared with $1,621 million in the same quarter of 1998, an increase of 12 percent. For the first nine months of 1999, noninterest income was $5,350 million, compared with $4,870 million in the same period of 1998, an increase of 10 percent. The increase for the third quarter of 1999 was mostly due to higher net mortgage servicing fees and higher venture capital gains partially offset by gains on sales of mortgages in the third quarter of 1998. The increase for the first nine months of 1999 was primarily due to higher net mortgage servicing fees, venture capital gains and trust and investment fees and commissions.
Noninterest expense was $2,418 million in the third quarter of 1999, compared with $2,347 million in the same quarter of 1998. In the first nine months of 1999, noninterest expense was $7,124 million, compared with $7,097 million in the same period of 1998. The efficiency ratio improved to 57.7 percent for the third quarter of 1999 and 57.9 percent for the first nine months of 1999, compared with 60.4 percent and 61.4 percent for the same periods a year ago.
The provision for loan losses was $240 million for the third quarter of 1999, compared with $307 million for the same period in 1998. Net charge-offs totaled $241 million, or .85 percent of average loans (annualized), in the third quarter of 1999. Net charge-offs totaled $318 million, or 1.18 percent of average loans (annualized), for the third quarter of 1998. For the nine months ended September 30, 1999 the loan loss provision was $770 million and net charge-offs totaled $775 million, or .94 percent of average loans (annualized), compared with a loan loss provision of $921 million and net charge-offs of $931 million, or 1.18 percent of average loans (annualized) for the same period of 1998.
At September 30,1999, the allowance for loan losses of $3,167million was 2.76percent of total loans, compared with 2.90percent at December31,1998 and 2.94percent at September30,1998. Total nonaccrual and restructured loans were $698million at September30,1999, compared with $710million at December31,1998 and $722million at September 30, 1998.
Wells Fargo has four lines of business for management reporting: Community Banking, Wholesale Banking, Norwest Mortgage, and Norwest Financial (Consumer Finance). Net income of the four business segments was:
Year to Date|
Year to Date|
More financial information on the business segments is on page 22.
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.
Community Banking reported record earnings of $747million in the third quarter of 1999, 33 percent above third quarter 1998 earnings of $562million. For the first nine months of 1999, earnings were 41 percent higher than the corresponding period for 1998.
"The merger has produced sales momentum in Community Banking for the third consecutive quarter," said Les Biller, vice chairman and chief operating officer. "For example in California, Wells Fargos largest market and home to one of nine Americans, we sold 780,000 core products during the third quarter, up 4.5 percent from the second quarter."
"Our team has achieved so much, in such a short time, because the spirit and energy of our team members throughout the state is great," said Terri Dial, group executive vice president of California Banking Group. "Team members and customers are reacting positively to our focus on people as a competitive advantage."
Biller added, "Our home equity sales for the entire company grew rapidly during the quarter with outstanding balances up almost 6 percent from June 30, 1999. The recent national rollout of Internet home equity loans not only enables us to rapidly customize product features such as loan type, payment flexibility, pricing and other benefits real-time but also enhances the prospects for continued growth in this important product area."
Wholesale Bankingserves 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 $223million in the third quarter of 1999, 29 percent above third quarter 1998 earnings of $173 million. For the first nine months of 1999, earnings were 4 percent higher than the corresponding period for 1998.
"We remain focused on our strategy of cross-selling and attracting new customers in Wholesale Banking," said Dave Hoyt, group executive vice president of Wholesale. "The number of new middle market relationships continues to increase with most of the growth coming from California, Texas and the rest of the Southwest. We also continue to have very strong performance from our Equipment Finance and two asset-based lending businesses."
Norwest Mortgageis the second largest originator and servicer of home mortgage loans in the United States.
For the third quarter of 1999, Norwest Mortgage earned $70million, 25 percent above third quarter 1998 earnings of $56million. For the first nine months of 1999, earnings were 28 percent higher than the corresponding period for 1998.
|(dollars in billions)||9/30/99||6/30/99||3/31/99||12/31/98||9/30/98|
|Year to date||69||50||28||109||75|
|Amortization of capitalized servicing rights (in millions):|
|Year to date||599||460||294||786||570|
|Weighted average coupon||7.30 %||7.30 %||7.34 %||7.42 %||7.54 %|
|Capitalized servicing rights as a percentage of servicing portfolio||1.58||1.53||1.41||1.26||1.17|
"We reported an increase in mortgage company earnings despite a reduction in overall loan originations," said Mark Oman, group executive vice president of Norwest Mortgage. "Our strong performance once again demonstrates the value of maintaining a balanced presence in both the origination and servicing businesses. During the quarter, we continued to grow our origination capability in Wells Fargo's western banking states. And, we aggressively pursued innovative ways to support our existing sales channels. Forexample, in August, we established an alliance with Homestore.com as part of our strategy to leverage the Internet to further increase our visibility, expand our consumer outreach, and drive more traffic into our retail store network and centralized platform."
Norwest Financialoffers consumer finance and auto finance in 47 states, Canada, the Caribbean and Latin America.
Norwest Financial reported earnings of $66million in the third quarter of 1999, 20percent above the third quarter 1998 earnings of $55million. For the first nine months of 1999, earnings were 16 percent higher than the corresponding period for 1998.
"We are very encouraged by our earnings growth for the third quarter and first nine months of 1999," said Dave Wood, chairman and chief executive officer of Norwest Financial. "Total loans grew 2.5 percent from June 30, 1999, including 2.8 percent growth in our core domestic businesses. Our reorganization of Island Finance is largely completed and we look forward to its return to profitable operating earnings."
Wells Fargo & Company and subsidiaries (the Company) is a $207 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 Securities Litigation Reform Act:
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 Companys control -- could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. The Companys reports filed with the Securities and Exchange Commission, including the Companys Form 10-Q for the quarter ended June 30, 1999, describe some of these factors, including certain credit, market, operational, liquidity, interest rate, and Year 2000 risks associated with the Companys business and operations. Other factors described in the Companys June 30, 1999 Form 10-Q include changes in business and economic conditions, competition, fiscal and monetary policies, disintermediation, legislation, 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 Companys business, results of operations and financial condition.