Wells Fargo & Company (WFC)

WFC 
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Wells Fargo & (WFC)

Q4 2011 Earnings Call

January 17, 2012 9:30 am ET

Executives

Jim Rowe - Director of Investor Relations

Timothy J. Sloan - Chief Financial Officer and Senior Executive Vice President

John G. Stumpf - Chairman, Chief Executive Officer and President

Analysts

Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division

Nancy A. Bush - NAB Research, LLC, Research Division

John E. McDonald - Sanford C. Bernstein & Co., LLC., Research Division

Christopher M. Mutascio - Stifel, Nicolaus & Co., Inc., Research Division

Leanne Erika Penala - BofA Merrill Lynch, Research Division

Joe Morford - RBC Capital Markets, LLC, Research Division

Moshe Orenbuch - Crédit Suisse AG, Research Division

Matthew D. O'Connor - Deutsche Bank AG, Research Division

Marty Mosby - Guggenheim Securities, LLC, Research Division

Edward R. Najarian - ISI Group Inc., Research Division

Frederick Cannon - Keefe, Bruyette, & Woods, Inc., Research Division

Paul J. Miller - FBR Capital Markets & Co., Research Division

Betsy Graseck - Morgan Stanley, Research Division

Brian Foran - Nomura Securities Co. Ltd., Research Division

Todd L. Hagerman - Sterne Agee & Leach Inc., Research Division

Presentation

Operator

Good morning. My name is Regina, 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. [Operator Instructions] Please note that today's call is being recorded. I would now like to turn the call over to Jim Rowe, Director of Investor Relations. Mr. Rowe, you may begin your conference.

Jim Rowe

Thank you, Regina. Good morning, everyone. Thank you for joining our call today, during which our Chairman and CEO, John Stumpf; and our CFO, Tim Sloan, will review fourth quarter results and answer your questions.

Before we get started, I would like to remind you that our fourth quarter earnings release and quarterly supplement are available on our website. I'd also like to caution you that we may make forward-looking statements during today's call that 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 containing our earnings release and quarterly supplement.

Information about any non-GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can be found in our SEC filings, in the earnings release and in the quarterly supplement available on our website at wellsfargo.com.

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

John G. Stumpf

Thank you, Jim. Good morning. Happy new year, and thanks for joining us today. A year ago, we were excited about all the opportunities we had ahead of us, even in a challenging economic environment, and I couldn't be more pleased with all that we accomplished in 2011. We earned a record $15.9 billion, up 28% from 2010. We grew deposits by $72 billion, up 9%. We grew loans by $12 billion and grew our core loan portfolio by $33 billion. We achieved record retail banking cross-sell of 5.9 products per household. We improved credit quality with net charge-offs down 36% from a year ago. We began our expense initiative and remained focus on our target of $11 billion in noninterest expense in the fourth quarter of this year, 2012. We grew ROA by 24 basis points and increased ROE by 160 basis points. And we remain committed to helping homeowners stay in their homes, with over 720,000 active or completed loan modifications initiated since the beginning of 2009.

We also increased capital levels while providing shareholders with a higher return on their investment by increasing our dividend and repurchasing 86 million shares of common stock. We also redeemed $9.2 billion of high-cost trust preferred securities. We accomplished all of this while completing the conversion of Wachovia's retail banking stores, the largest conversion in banking history. Our 6,239 retail banking stores are now on a single platform, serving customers coast to coast. In most mergers in financial services, customer service typically declines, but our team members remain committed to providing outstanding customer service as reflected in Wells Fargo, once again, ranking #1 in customer satisfaction among large banks based on a national survey.

2011 was a remarkable year, but I'm even more excited about the opportunities that lie ahead as we enter 2012 as One Wells Fargo. We have submitted our board-approved capital plan to the Fed, and we are focused on returning even more capital to our shareholders. We remain focused on better serving our existing customers and welcoming new customers as we grow market share, both organically and through acquisitions. And we remain committed to strengthening the overall economy by lending to our business customers to fund growth and create jobs, by helping homeowners stay in their homes through participating in Home Preservation Workshops and loan modifications and by being active volunteers in the communities where we live and where we work. The vision -- this vision has guided us for decades, meeting our customers' financial needs, will continue to drive our growth in the year ahead.

Let me now turn this over to Tim Sloan for more detail on our financial results. Tim?

Timothy J. Sloan

Thanks, John, and good morning, everyone. My remarks will follow the presentation included in the first half of the quarterly supplement starting on Page 2. John and I will then take your questions.

As John highlighted, we achieved outstanding results in 2011, including a very strong fourth quarter. We generated record earnings of $4.1 billion, up 1% from the third quarter and up 20% from a year ago. Earnings per share were a record $0.73, also up 1% from last quarter and 20% from a year ago. This is the eighth consecutive quarter of EPS growth. In fact, by almost any measure, our results in the fourth quarter moved in the right direction, demonstrating the underlying strength of our diversified franchise. We had linked quarter growth in revenue with growth in both net interest income and noninterest income. We had higher pretax pre-provision profits, loans, deposits and securities available for sale. We also had strong credit quality, and our capital levels continue to grow.

On Page 3, we highlight our continued strong diversification, which is a major differentiator for Wells Fargo and is a key driver of our ability to generate growth over time and through various economic cycles and interest rate environments. Let me start with a few highlights of the drivers behind our balance sheet and income statement growth, and I'll add more detail later in my remarks.

Starting with the balance sheet. We generated strong loan growth this quarter with loans up $9.5 billion. Our core loan portfolio, which excludes the planned runoff from the liquidating portfolio, was up $13.7 billion from the third quarter. We, once again, purchased securities this quarter with balances up $15.4 billion from the third quarter as we continue to redeploy cash. We also generated strong deposit growth with balances up $24.6 billion.

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