Wells Fargo Reports First Quarter Record Net Income of Over $1 Billion|
SAN FRANCISCO--(BUSINESS WIRE)--April 18, 2000--Wells Fargo & Company (NYSE:WFC)
First Quarter 2000 Highlights:
-- Record Net Income of $1.01 billion, up 14% from prior year
-- Record Diluted Earnings Per Share of $.61, up 15% from prior year
-- Return on Assets (ROA) of 1.88 percent, Cash ROA of 2.23 percent
-- Return on Common Equity (ROE) of 18.24 percent, Cash ROE of 34.15 percent
-- Loan growth of 15 percent from first quarter 1999
-- Cash efficiency ratio of 53.4 percent
2000 from 1999
Net Income (in millions) $1,010 14%
Diluted Earnings per Common Share .61 15
Diluted Cash Earnings per Common Share(a) .70 15
Return on Assets 1.88% 4
Return on Common Equity 18.24 5
Cash Efficiency Ratio 53.4 (3)
Net Interest Margin 5.56 --
(a) Cash earnings exclude goodwill and nonqualifying core deposit intangible amortization and balances.
Wells Fargo & Company (NYSE:WFC) today reported record net income of $1,010 million for the first quarter of 2000, the first quarter of over $1 billion in earnings, and an increase of 14 percent from $884 million in the first quarter of 1999.
Diluted earnings per common share were a record $.61 for the first quarter of 2000, an increase of 15 percent from $.53 in the first quarter of 1999. Return on average assets (ROA) was 1.88 percent for the first quarter of 2000, compared with 1.80 percent for the first quarter of 1999. Return on average common equity (ROE) was 18.24 percent for the first quarter of 2000, compared with 17.33 percent for
the first quarter of 1999. Diluted cash earnings per share were a record $.70 for the first quarter of 2000, an increase of 15 percent from $.61 per share for the same period of 1999. Cash earnings are earnings before the amortization of goodwill and nonqualifying core deposit intangible. Cash ROA was 2.23 percent and cash ROE was 34.15
percent for the first quarter of 2000, compared with 2.17 percent and 34.38 percent, respectively, for the first quarter of 1999.
"Thanks to our diverse businesses and talented team members, we've begun 2000 with significant earnings momentum as we continue to meet our ambitious business and profitability goals," said President and CEO Dick Kovacevich. "This is our fifth consecutive quarter of record
growth in all key measures of financial performance since the completion of the merger of equals of the former Norwest and the former Wells Fargo -- another indication of our ability to deliver on what we said we'd do. Revenue for the quarter increased by 9 percent over 1999 -- close to our ambitious long-term goal of double-digit revenue increases. This performance is all the more remarkable when you consider that, at the same time, our people have successfully combined systems in five of our banking states with no significant problems for our more than two million banking households in those states -- Arizona, New Mexico, Nevada, Texas and Utah. We're also bringing more than one million new banking households into the Wells Fargo family with recent announced acquisitions including Michigan Financial Corporation, First Commerce Bancshares of Nebraska, National Bancorp of Alaska and our recent agreement to merge with First Security Corporation of Salt Lake City. Our goal, however, is not to be the biggest financial services company in America, our goal is to be the best, with service quality number one, second to none and gaining 100 percent of our customers' financial services business. As an indicator of our financial success and low-risk profile, Moody's increased our debt ratings from Aa3 to Aa2 this quarter."
"The $.70 diluted cash earnings per share reported for the first quarter of 2000 roughly reflect the core operating performance of the company," said Ross Kari, chief financial officer. "Venture capital gains of $885 million were substantially offset by losses of $602 million on the sales of securities from the continued restructuring of the investment portfolio, a $160 million write-down of auto lease residuals due to continuing deterioration in used car prices, integration and other expenses."
"During the quarter we continued to make progress in developing integrated online products and services for our varied and diverse customer segments, including small businesses, commercial enterprises, investors and consumers," said Clyde Ostler, group executive vice president of the Internet Services Group. "Importantly, we signed a significant partnership with eBay and Billpoint to develop an integrated online person-to-person payment capability for eBay's 10 million registered users. Through our joint ownership of Billpoint we will have a proven end-to-end solution for such payments on the Internet. In the future we plan to provide this capability to other sites and businesses on the Internet. Online Consumer Banking continued to grow at over 100,000 new customers per month. We currently have over 1.7 million active online users, representing almost one in four retail checking households. Over 450,000 of our online customers use our bill paying service as well. We were recognized by Nielsen NetRatings as having more unique visitors to our website than any other bank as of February 2000."
Net Interest Income
Net interest income on a taxable-equivalent basis was a record $2,456 million in the first quarter of 2000, compared with $2,281 million for the same quarter a year ago. The net interest margin was 5.56 percent for the first quarter of 2000, compared with 5.58 percent for the same period of 1999.
"Net interest income grew $45 million in the first quarter, as compared to fourth quarter 1999, due primarily to higher loan balances of 4.5 percent from December 31, 1999," said Kari. "The margin declined 5 basis points to 5.56 percent during the quarter due primarily to the use of higher costing short-term borrowings to partially fund this loan growth and other earning asset mix changes, including a $2.9 billion temporary increase in the investment securities portfolio. As part of our restructuring program, we purchased securities before selling existing securities to take advantage of market opportunities."
"Core deposits are up slightly versus the fourth quarter with reductions due to normal seasonality being offset by the impact of acquisitions plus modest growth," Kari added. "Also, deposits in off balance sheet sweep accounts showed continued strong growth. Sweep balances currently total approximately $20 billion and have grown 26% over the past year."
Noninterest income in the first quarter of 2000 was $1,911 million, an increase of 11 percent from $1,727 million in the same quarter of 1999. The increase was primarily due to net venture capital gains of $885 million, offset by losses of $602 million on the sales of securities that resulted from the continued restructuring of the securities available for sale portfolio and a $160 million write-down of auto lease residuals.
Noninterest expense was $2,479 million in the first quarter of 2000, an increase of 6 percent from $2,342 million in the same quarter of 1999. The efficiency ratio improved to 57.0 percent for the first quarter of 2000, compared with 58.7 percent for the same quarter of 1999. On a cash basis, this ratio improved to 53.4 percent, compared
with 54.9 percent for the same quarter of 1999.
The provision for loan losses was $255 million for the first quarter of 2000, compared with $270 million for the same period in 1999. Net charge-offs totaled $254 million, or .84 percent of average loans (annualized), in the first quarter of 2000, compared with $273 million, or 1.03 percent of average loans (annualized), for the first quarter of 1999.
At March 31, 2000, the allowance for loan losses of $3,237 million was 2.59 percent of total loans, compared with 2.65 percent at December 31, 1999 and 2.92 percent at March 31, 1999. Total nonaccrual and restructured loans were $744 million at March 31, 2000, compared with $669 million at December 31, 1999 and $704 million at March 31, 1999.
Wells Fargo has four lines of business for management reporting:
Community Banking, Wholesale Banking, Wells Fargo Home Mortgage, and Norwest Financial (Consumer Finance). Net income of the four business segments was:
(in millions) 2000 1999
Community Banking $721 $622
Wholesale Banking 252 222
Wells Fargo Home Mortgage 67 66
Norwest Financial 56 54
More financial information on the business segments is on page 21.
Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including investment, insurance and trust services primarily in 22 midwestern and western states.
Community Banking reported earnings of $721 million in the first quarter of 2000, 16 percent above first quarter 1999 earnings of $622 million.
"Our 11 percent increase in revenue growth is the direct result of the significant momentum we continue to see in sales and service across our entire community banking franchise," said Chief Operating Officer Les Biller. "For example, a recent cross-sell effort in Nevada between our bankers and our mortgage sales representatives resulted in mortgage leads that added 50 new bank customers and 70 mortgage applications in just six weeks. Our Commercial Banking team in Newport Beach, Calif., referred a corporate customer to Private Client Services who helped complete a $40 million loan and a customer relationship resulting in approximately $800,000 in annual revenue. And in Rapid City, South Dakota, after a team of our bankers helped a customer sell his business, the customer returned to invest several million dollars with us, and the new owners of the business also came to us for loans, insurance, corporate credit cards, merchant cards, and treasury management."
"Home Equity balances were up 5.4 percent during the quarter and 27 percent from first quarter 1999," Biller added. "We are particularly pleased with Home Equity sales through Wellsfargo.com. Our home equity Internet channel posted a 75 percent increase in application volume, with 30 percent of all online applications coming from outside our banking states."
Wholesale Banking serves 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 $252 million in the first quarter of 2000, 14 percent above first quarter 1999 earnings of $222 million.
"Wholesale Banking began the year with a strong first quarter," said Dave Hoyt, group executive vice president of the Wholesale Bank. "Net income for the group is 17% above last quarter and 14% ahead of first quarter last year. We are seeing growth in all of our core businesses. For example, total revenue for middle market banking is up 23% over the first quarter 1999, equipment finance revenue is up 37% and asset-based lending revenue is up 29%. On the lending side, our total loan outstandings have grown 16% over first quarter last year. Credit quality remains good due to strong economic conditions. Also, our operating services continue to be a larger source of our earnings. These businesses, which include our institutional investment services, treasury management, international and domestic risk management, and our real estate investment bank Eastdil, now account for 43% of our total revenue."
Wells Fargo Home Mortgage (formerly Norwest Mortgage) is the largest retail originator and a leading servicer of home mortgage loans in the United States.
Wells Fargo Home Mortgage reported earnings of $67 million in the first quarter of 2000, 2 percent above first quarter 1999 earnings of $66 million.
(dollars in billions) 3/31/00 12/31/99 9/30/99 6/30/99 3/31/99
Quarter $12 $13 $19 $23 $28
Year to date 12 82 69 50 28
Unclosed pipeline 16 12 16 19 20
Servicing portfolio 284 280 274 266 257
rights (in millions):
Quarter 123 84 139 166 294
Year to date 123 683 599 460 294
Weighted average coupon 7.37% 7.33% 7.30% 7.30% 7.34%
rights as a percentage
of servicing portfolio 1.63 1.60 1.58 1.53 1.41
"Without the high level of refinancing activity we experienced in 1998 and 1999, mortgage originations this year are reflecting a more normal seasonal pattern," said Mark Oman, group executive vice president and chairman of Wells Fargo Home Mortgage. "Our strong earnings this quarter reflect the balance we have between our mortgage origination businesses and our $284 billion servicing portfolio. When refinancing activity slows down the servicing portfolio pre-payments also slow down. Lower pre-payments reduce capitalized servicing rights amortization expense. The lower amortization expense in the first quarter allowed us to report strong earnings despite the significantly lower level of originations compared to last year."
Norwest Financial offers consumer and commercial finance, leasing and technology services in 47 states, Canada, the Caribbean and Latin America.
Norwest Financial reported earnings of $56 million in the first quarter of 2000, 4 percent above first quarter 1999 earnings of $54 million.
"We were pleased with our first quarter results which were slightly ahead of 1999 and modestly ahead of our plan," said Dan Porter, group executive vice president of Norwest Financial. "We're looking at 2000 as a year to set the stage for future growth with new processes and products and a new excitement in our company as we take on the Wells Fargo name in the third quarter."
A recorded message reviewing the quarter is available through April 21, 2000. You may access the call by dialing 800-633-8284 (domestic) or 858-812-6440 (international). The access code is 14936275. The call is also available at www.wellsfargo.com/ir or www.vcall.com.
Wells Fargo & Company is a diversified financial services company with $222 billion in assets, providing banking, insurance, investments, mortgage and consumer finance from about 5,300 stores and the Internet (wellsfargo.com) across North America and elsewhere
Visit Wells Fargo at www.wellsfargo.com.
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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."
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