July 22, 2009

Wells Fargo-Wachovia Shares Joint Results; Says FA Inflows, Sales, Recruiting 'Strong'

The combined firm notes that it continues to experience robust broker recruiting - and says financial advisors hired this year are 60 percent more productive than those who have left the firm.

Wells Fargo has reported net income of $3.17 billion in the second quarter of 2009, up 81 percent from last year, and net income of $6.22 billion for the six months ended June 30, 2009, up 66 percent from last year

It also says it had record revenue of $22.5 billion, up 28 percent (annualized) from the first quarter. This included legacy Wells Fargo revenue of $13.6 billion, up 19 percent from last year; and year-to-date legacy Wells Fargo revenue of $25.9 billion, up 18 percent.

Wachovia, now part of Wells Fargo, contributed 39 percent of consolidated revenue in the second quarter.

And the bank says it had a broad-based revenue contribution from diverse businesses, with particular strength in regional banking, commercial banking, mortgage banking, investment banking, asset-based lending, auto lending, student lending, debit card, merchant card, wealth management, securities brokerage retirement services and international operations.

Wells Fargo also says that the Wachovia integration is proceeding as expected, adding that business and revenue synergies are ahead of expectations; it is on track to realize annual run-rate savings of $5 billion upon full integration; and that it has completed the re-branding of Wachovia brokerage, capital markets and insurance businesses as Wells Fargo Advisors, Wells Fargo Securities and Wells Fargo Insurance Services, respectively.

"Our very strong growth in revenue, deposits and net income this quarter and the first half of this year demonstrates again that the combined Wells Fargo-Wachovia has significant power to generate capital internally," explains President and CEO John Stumpf. "Thanks to the customer focus of our 282,000 talented team members, our revenue rose 28 percent (annualized) from first quarter as we set new cross-sell records and gained even more market share by satisfying all our customers' financial needs and helping them succeed financially.

"At legacy Wells Fargo, 41 percent of our retail households have a cross-sell ratio over six, and one out of every four retail households now have at least eight products with us," Stumpf shares. "Our Wachovia team members also contributed significantly to our results this quarter and the first half of the year, generating 39 percent of consolidated second quarter revenue. Wells Fargo Advisors (formerly Wachovia Securities) was ranked #1 by Forrester Research among all investment/ brokerage firms based on client perceptions for 'doing what's best for me and my household.'

"Our top priority is to integrate Wachovia into Wells Fargo as smoothly and efficiently as possible to benefit our 70 million customers, which equals about one of every three U.S. households. The Wells Fargo-Wachovia integration is on track," the president and CEO notes. "In November, Colorado will become our first community banking state to convert Wachovia's financial centers to Wells Fargo systems, brand and sales processes - a conversion process that will continue deliberately and thoughtfully, region by region and state by state, throughout next year and into 2011.

"Our team achieved these results while undertaking the largest merger integration in U.S. banking history and despite the challenging economy. We intend to pay back the government's investment in Wells Fargo ...," he says.

The wealth, brokerage and retirement segments reported net income of $363 million, up 40 percent for the linked quarter. Second-quarter earnings were driven by increased brokerage transaction activity, improved market valuations, strong deposit growth and securities gains.

In the retail brokerage operations, client assets increased 8 percent to $986 billion from prior quarter, and managed account assets increased $22 billion, or 16 percent, from prior quarter, including net inflows of $10 billion. The firm says it continues to experience strong broker recruiting - and financial advisors hired this year are 60 percent more productive than those who have left the firm.

In wealth management, average deposits were up 19 percent from prior quarter, led by continued growth in the Unlimited NOW account product, and private banking revenue were up 20 percent from prior quarter on strong deposit growth.

Retirement plan assets stood at $250 billion, up $27 billion, or 12 percent, from the prior quarter, while IRA assets were $212 billion, up $20 billion, or 10 percent, from prior quarter.

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