Wells Fargo & Company (WFC)

WFC 
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Wells Fargo & Company (WFC)

Q4 2009 Earnings Call Transcript

January 20, 2009 10:30 am ET

Executives

Bob Strickland – Director, IR

John Stumpf – Chairman, President and CEO

Howard Atkins – Senior EVP & CFO

Analysts

Matt O'Connor – Deutsche Bank Securities

Nancy Bush – NAB Research

Betsy Graseck – Morgan Stanley

Paul Miller – FBR Capital Markets

Andrew Marquardt – Macquarie Research Equities

Ron Mandel [ph]

John McDonald – Sanford Bernstein

Joe Morford – RBC Capital Markets

Presentation

Operator

Good morning. My name is Celeste and I will be your conference operator today. At this time, I would like to welcome everyone to the Wells Fargo fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you. I would now like to turn today’s call over to Mr. Bob Strickland. Please go ahead, sir.

Bob Strickland

Good morning. This is Bob Strickland, Director of Investor Relations at Wells Fargo. Thank you for joining us on our call today where John Stumpf and Howard Atkins will review fourth quarter and full year 2009 results and answer your questions.

Before we get started, I would like to remind you that our fourth quarter earnings release and financial supplements are available on our website. I’d also like to caution you that we may make forward-looking statements during today’s call and that those forward-looking statements are subject to risks and uncertainties.

Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8-K filed today and the earnings release and financial supplement included as exhibits. In addition, some of the discussion today about the company’s performance will include references to non-GAAP financial measures. Information about those measures, including a reconciliation of those measures to GAAP measures, can be found in our SEC filings and in the earnings release and financial supplement available on our website at wellsfargo.com.

I will now turn the call over to the Chairman and CEO, John Stumpf.

John Stumpf

Thanks, Bob, and thanks to everyone who has joined us this morning on this call. We appreciate your interest in Wells Fargo and look forward to reviewing our results and answering your questions. First, let me say how proud I am of all the dedicated Wells Fargo team members across the nation who put forth tremendous effort to help us achieve strong results throughout the year.

In my 28 years at Wells Fargo, I believe 2009 was the best year we ever had in terms of positioning us for the future growth. Looking back at where we were last year at this time, I believe our business is better in virtually every aspect. We generated record earnings, strengthened our balance sheet, and removed a great deal of risk from our businesses. We generated significant capital, both internally and externally, ending the year with capital ratios higher than they were before we completed the Wachovia merger.

I couldn’t feel better about the opportunities ahead. With a company that is twice the size it was in 2008, we see tremendous opportunity ahead as we continue to integrate our two companies. The merger with Wachovia is exceeding all of our expectations in terms of expense savings, successfully meeting integration milestones, the quality of our team members and customers, and the opportunities we see together going forward.

Now to be sure, we’ve had – we’ve all had to manage through a lot of change and uncertainty over the past year. While the economy is starting to show some signs, positive signs, and pockets of stability, the unemployment rate is still too high and housing price improvement continues to be spotty. No doubt, there will be surprises ahead. But the business model that has served Wells Fargo well for over two decades, focus on diversification and satisfying all of our customers’ financial needs continues to serve us well in the current environment and will guide us through 2010 and beyond.

In fact, if you liked Wells Fargo in the past, you should love us today. As a result of the merger with Wachovia, our business model is even stronger. We have more geographic diversity and twice the number of customers who we can better serve with a more diverse and powerful set of products. We are more balanced between fee income and interest income and between commercial and consumer businesses.

And while we have gained much with our merger with Wachovia, much has remained the same. We have the same strong management team, I believe the best in the business, made even better with the addition of Wachovia team members who remain focused on providing exceptional customer service. We have the same culture and singular focus on helping our customers succeed financially, because when our customers succeed, so do we.

We measure hundreds of things everyday at Wells Fargo. For example, how many checking accounts were opened, how many mortgages we originate, how many did we modify, how many assets do we have under management. But the most important thing we measure is revenue growth. We believe revenue growth is the best measure of how well we serve our customers.

In 2009, we generated a record $89 billion in revenue, including fourth quarter revenue of $23 billion. This revenue growth was diverse with double-digit annualized linked-quarter growth in asset management, auto lending through Wachovia Dealer Services, merchant card, insurance, mortgage banking, and wealth management. With the merger, we see even more opportunities to grow.

In addition, because of the financial crisis, we have never seen a better opportunity to grow market share and earn more of our existing customers’ business. Let me give you some examples of what we already have achieved. On average, retail bank household at legacy Wells Fargo now has 5.95 cross-sell of Wells Fargo products, up from 5.73 products just a year ago. Our market share in mortgage originations is 23%, up from 16% in 2008 and 10% in 2006. In auto lending, we are the number one used auto lender with a 6% market share, up from 4% a year ago.

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