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Will Wells Fargo Regret Buying Wachovia?

Business 2009. 1. 29. 23:53

The merger puts one of the credit crisis's good guys under pressure.

With a greater-than-expected $2.5 billion fourth-quarter loss, San Francisco-based Wells Fargo is proving no bank is immune from the credit crisis, even though it has come through the storm in relatively stronger shape.

Wells Fargo (nyse: WFC - news - people ) is steeling itself for rising loan losses, packing $5.6 billion away in credit reserves and tripling its credit provision to $8 billion. It wrote off $37 billion of risky Wachovia (nyse: WB - news - people ) assets that had been part of a $90 billion pool of troubled loans.

Wachovia's fourth-quarter numbers weren't consolidated into Wells Fargo's results. It had a disastrous $11 billion loss in the period. That said, it beat the $23 billion third-quarter loss, which prompted Wachovia's sale in the first place.

The merger and extra reserving pressured capital ratios. Though still well capitalized, Wells Fargo's 7.9% Tier 1 ratio is on the low end of large U.S. banks even though Wells said it was keeping its 34-cent quarterly dividend intact and wouldn't need any more capital out of the Troubled Asset Relief Program.

Other banks, including Citigroup (nyse: C - news - people ) and Bank of America (nyse: BAC - news - people ), have slashed their dividends almost to nothing after getting government money out of the TARP program.

Analysts said Wells Fargo's own loan portfolios, especially its exposure to the rough California real estate market, indicate signs of further stress ahead. Charge-offs as a percentage of loans rose to 2.69% from 1.96%.

"This shows that the recession is driving increased loan defaults--even in the more conservative Wells Fargo portfolio--and does not bode well for the industry or the economy at large," said Bart Narter, an analyst at Celent.

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Stocks Down As Auto Bailout Hopes Dim

Business 2008. 12. 13. 03:19

This is a transcript of the Market Update: Close video report.

Wall Street to a hit Thursday as stocks slipped in the final hours of trading. The Dow fell 196 points, the S&P 500 dropped 26 and the Nasdaq fell 58 points.

Bank of America (nyse: BAC - news - people ) said it will cut 30,000 to 35,000 jobs over the next three years as it completes its merger with Merrill Lynch (nyse: MER - news - people ). The company said the cuts will eliminate redundancies, and the final plan should be released in early 2009. Stocks dropped over 10% late in the day.

Other financials were in the red, led by JPMorgan Chase (nyse: JPM - news - people ). A UBS analyst slashed the price target on JPMorgan to $34 from $44, citing ongoing headwinds in the credit markets. Wells Fargo (nyse: WFC - news - people ) lost 11%. Citigroup (nyse: C - news - people ) fell nearly 9%.

In Washington, hope dimmed for the automaker bailout. With many Republican senators voicing dissent, the $14 billion rescue plan may not have enough votes to pass the Senate. General Motors (nyse: GM - news - people ) fell 10%; Ford Motor (nyse: F - news - people ) dropped 11%.

Oil rallied more than $3 to rest above $47. The world's biggest oil producer, Saudi Arabia, cut production by more than the traders and analysts had forecast last month. Royal Dutch Shell (nyse: RDSA - news - people ) and Chevron (nyse: CVX - news - people ) added 1%.

In tech, Microsoft (nasdaq: MSFT - news - people ) fell more than 5%, after a Morgan Stanley analyst cut profit estimates for the software maker in anticipation of a major slowdown in tech spending.

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Wachovia Posts Largest-Ever Loss for a Bank

Business 2008. 10. 23. 08:47

Wachovia Posts Largest-Ever Loss for a Bank

Wachovia posted a $23.9 billion quarterly loss, as its portfolio of loans deteriorated and deposits fled the bank, laying bare the serious financial straits the company was in before Wells Fargo announced it would buy it this month.

The loss is the largest ever for a bank and, coming on top of $10 billion of losses earlier this year, wipes out nearly all the profits the firm has earned since the merger of two banks formed modern Wachovia in 2001.

The quarterly report revealed that Wachovia was experiencing a run in September as speculation about whether the bank would survive the financial crisis intensified. Depositors pulled out 5 percent of their money, or $13.4 billion, a massive amount for a bank.

San Francisco-based Wells Fargo is buying Charlotte-based Wachovia for $14 billion to form a bank that will have a combined 9,300 branches across the United States. Wells Fargo executives said Wachovia's losses were in line with what they expected and won't affect their plans.

"We believe that it was prudent for Wachovia to put these losses behind them," Howard Atkins, Wells Fargo's chief financial officer, said in a statement. "We're on track to complete the merger" by the end of the year.

Most of Wachovia's loss -- $18.8 billion -- stems from writing down the value of its reputation, brand and experience, an intangible measure known as "goodwill" that mainly plays a role in setting a company's value in mergers and acquisitions. The company lost $2.5 billion on its portfolio of loans and put away billions more to cover expected future losses.

Last year at the same time, the company posted a $1.7 billion profit. Wachovia shares have lost nearly 90 percent of their value in the past year.

Last month, the Federal Deposit Insurance Corp. engineered the acquisition of Wachovia by Citigroup and agreed to back part of the deal. But days later Wells Fargo swung in and made a richer bid that didn't involve government backing.

Citigroup vowed to press on with its purchase of Wachovia. All three banks braced for a big legal battle. But Citigroup later relented, allowing the Wells Fargo-Wachovia deal to proceed. Citigroup still has filed lawsuits pursuing billions in damages against the companies.

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Citi, Wells Fargo extend cease-fire over Wachovia

Business 2008. 10. 9. 07:21

NEW YORK (Reuters) - Citigroup Inc (nyse: C - news - people ) and Wells Fargo & (nyse: WFC - news - people )amp; Co agreed to hold off on litigation for two more days as they fight over the acquisition of Wachovia Corp (nyse: WB - news - people ) .

Citigroup, Wells Fargo, and the Federal Reserve are negotiating over the future of Wachovia Corp, a bank hobbled by the credit crisis but with a valuable network of branches.

Citigroup preliminarily agreed at the beginning of last week to buy Wachovia's banking assets with partial government assistance, and supported Wachovia last week while they hammered out final details.

Wells Fargo Friday said it had signed an agreement to buy the whole of Wachovia, including its asset management and retail brokerage arms.

Wells and Citigroup fought in court this weekend, but on Monday agreed to suspend litigation, a suspension that had been due to expire Wednesday at noon (1600 GMT).

In a statement, the banks said the deadline has been extended in consultation with the Federal Reserve to Friday, Oct. 10, at 8 a.m. (1200 GMT).

A person familiar with the matter said Tuesday that Citigroup and Wells Fargo were leaning toward a geographical division of Wachovia's branches, with Citigroup taking Northeastern and Mid-Atlantic branches, and Wachovia taking Western and Southeastern branches.

Wells Fargo would end up with about 75 to 80 percent of Wachovia's deposits, while Citi would end up with about 20 to 25 percent. But the situation was in flux and still subject to change, the person said.

The Wall Street Journal reported Wednesday that Citigroup was looking at receiving help from outside partners to take a higher proportion of the deposits.

Two judges Wednesday postponed court hearings as the parties extended the legal truce and continued to negotiate.

New York State Supreme Court Justice Charles Ramos postponed a hearing to Oct. 14 from Friday on Citigroup's action to stop Wachovia and Wells Fargo merging, the judge's clerk said.

U.S. District Court Judge Lewis Kaplan postponed a hearing indefinitely into Wachovia's attempt in federal court to prevent Citigroup from stopping Wells Fargo, according to court documents. The hearing had been scheduled for Wednesday afternoon.

Wells Fargo, the No. 7 U.S. bank by assets, has managed to remain profitable during the credit crunch while Citi is looking to turn around its ailing business after posting about $60 billion in write-downs and losses during the year. (Additional reporting by Elinor Comlay and Grant McCool; Editing by Tim Dobbyn)

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Citi Fights For Wachovia

Business 2008. 10. 7. 23:47

Citi Fights For Wachovia

Citigroup came out swinging on Monday, filing a $60.0 billion suit after Wachovia sought to jilt it in favor of a better takeover offer from Wells Fargo.

The shares of all three banks slid on Monday, with Citi showing the biggest decline, a sign that investors either think it will lose the battle or end up paying too much for some or all of Wachovia. The value of the suit is 30 times more than the size of Citi's proposed acquisition.

Citigroup’s shares tumbled 9.5%, or $1.75, to $16.61 in afternoon trading, while Wachovia’s shares sank 7.7%, or 48 cents, to $5.73. Wells Fargo (nyse: WFC - news - people ) slipped 1.7%, or 58 cents, to $33.98.

Citi filed a complaint in New York Supreme Court against Wachovia and Wells Fargo, seeking more than $60.0 billion in damages for interfering with its deal for the former's commercial banking operations. The complaint seeks more than $20.0 billion in compensation and more than $40.0 billion in punitive damages from Wells Fargo for tortious interference. Citigroup also seeks relief from Wachovia for an alleged breach of contract.

Last week, Citigroup (nyse: C - news - people ) bid $2.0 billion to buy Wachovia, deposits and assets and back its holding company debt, while Wells Fargo followed four days later with an offer of $15.0 billion , or $7.00 a share, for the whole thing. (See " Citigroup Swallows Wachovia." and " Wells Woos Wachovia Away From Citigroup.")

The original Citi plan would result in a rump Wachovia operation with the bank's securities units, A.G. Edwards and the Evergreen Securities.

Sanford Bernstein analyst John E. McDonald said Wells Fargo and Citigroup may submit additional bids or reach a compromise where they will split Wachovia’s branches geographically with Wells Fargo taking on Wachovia’s asset management and securities businesses. (See " Citigroup May Have To Walk Away.")

One reason the bidders may end up splitting Wachovia is that the original transaction, which was supported by the government, may have been aimed as much at bolstering Citi as it was in avoiding an outright failure of Wachovia. He said Citi's financial position would be a factor in how the Federal Deposit Insurance Corp., which would be on the hook if Wachovia (nyse: WB - news - people ) failed, handles the situation in the coming days.

McDonald said, however, that he expects Wells Fargo’s bid to succeed. It will expand Wells Fargo's earnings power, though at the risk of weakening its balance sheet and generating significant integration and legal costs. The benefits will not appear immediately, he said, estimating a Wachovia takeover would negatively impact Wells Fargo’s earnings by 30.0% in 2009 and 2010.

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Information Security & US & Life & Love & Fashion & Hacking & Passion

'wells fargo'에 해당되는 글 5건

Will Wells Fargo Regret Buying Wachovia?

The merger puts one of the credit crisis's good guys under pressure.

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