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FOR IMMEDIATE RELEASE TUESDAY, OCTOBER 13, 1998 WWW.USDOJ.GOV |
AT (202) 616-2771 TDD (202) 514-1888 |
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JUSTICE DEPARTMENT APPROVES NORWEST/WELLS FARGO MERGER Banks Agree to Sell a total of 26 Branch Offices in Arizona and Nevada WASHINGTON, D.C. Â The Department of Justice today cleared the $34 billion mergerof Norwest Corporation with Wells Fargo & Company after both banks agreed to sell 26 branchoffices in Arizona and Nevada with deposits totaling approximately $1.18 billion. Norwest and Wells Fargo have agreed to divest a total of 14 branches with deposits of$457 million located in Flagstaff, Lake Havasu City, Payson, Mesa, Phoenix, Scottsdale, Tempe,Pinetop, Sierra Vista, and Yuma, Arizona. In Nevada, Norwest and Wells Fargo have agreed todivest a total of 12 branches with deposits of $721 million located in Carson City, Elko, Fallon,Las Vegas, Henderson, Reno, Winnemucca, and Yerington. "The divestiture will ensure that local customers, particularly small businesses, will haveaccess to competitively priced banking services," said Joel I. Klein, Assistant Attorney Generalin charge of the Antitrust Division. In addition, Norwest and Wells Fargo have agreed that they will not take steps to precludeother financial institutions from leasing or purchasing any bank branches that they may close dueto consolidation resulting from this merger. Subject to regulatory approvals, the 26 branches andassociated loans and deposits that Norwest and Wells Fargo will divest will be sold to one ormore competitively suitable buyers. The proposed merger of Norwest and Wells Fargo is subject to the approval of the Boardof Governors of the Federal Reserve System. The Department said that it will advise the FederalReserve Board that, subject to divestiture of the branch offices and associated loans and deposits,the Division will not challenge the merger. Norwest is headquartered in Minneapolis. It has $57.8 billion in deposits and $96.1billion in assets. Its banking offices are located in Arizona, Colorado, Illinois, Indiana, Iowa,Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, South Dakota,Texas, Wisconsin, and Wyoming. Wells Fargo is headquartered in San Francisco. It has $72.3 billion in deposits and $94.8billion in assets. Its banking offices are located in Arizona, California, Colorado, Idaho, NewMexico, Nevada, Oregon, Utah, and Washington. A list of the branches to be sold is attached. |
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News Release
Fourth Quarter Per Share Loss of ($.12) due primarily to merger-related charges
WellsFargo & Co. (NYSE:WFC) today reported net income (loss) of ($194)million for the fourth quarter of 1998, compared with $650 million forthe fourth quarter of 1997. Diluted earnings (loss) per common share for the quarter were ($.12), compared with $.39 in the fourth quarter of 1997. Earnings for the full year of 1998 were $1,950 million, or$1.17 per share, compared with $2,499 million, or $1.48 per share, for the full year 1997. Earnings for the quarter were affected by merger-related and other charges of approximately $1.2 billion(equivalent to ($.45) per share) and a provision for loan losses approximately $320 million (equivalent to ($.13) per share) above the level of prior quarters primarily due to loan losses in Island Finance.
On November 2, 1998, Wells Fargo & Company (the former Wells Fargo) merged with WFC Holdings Corporation (WFC Holdings), a wholly-owned subsidiary of Norwest Corporation. In connection with the merger, Norwest Corporation changed its name to "Wells Fargo & Company." The merger was accounted for as a pooling of interests and, accordingly, the information included in this release presents the combined results of Wells Fargo & Company and its subsidiaries (the Company) as if the merger had been in effect for all periods presented.
Excluding the fourth quarter charges and higher provision mentioned above, return on average assets (ROA) and return on average common equity (ROE) would have been 1.53 percent and 14.32 percent, respectively, for the fourth quarter of 1998, compared with 1.42 percent and 13.12 percent, respectively, for the fourth quarter of 1997. ROA and ROE would have been 1.54 percent and 14.52 percent, respectively, for the full year of 1998, compared with 1.37 percent and 12.81 percent, respectively, for the full year of 1997.
Diluted cash earnings(loss) for the fourth quarter of 1998 were ($.04) per share, compared with $.48 for the fourth quarter of 1997. Diluted cash earnings for the full year of 1998 were $1.50, compared with $1.83 for the full year of 1997. Cash earnings are earnings before the amortization of goodwill and nonqualifying core deposit intangible. Excluding the fourth quarter charges mentioned above, diluted cash earnings per share would have been $.54 for the fourth quarter. Excluding the fourth quarter charges mentioned above, cash ROA and cash Return on Tangible Common Equity(Cash ROE) would have been 1.88 percent and 28.94 percent, respectively, for the fourth quarter of 1998, compared with 1.83 percent and 30.41 percent, respectively, for the fourth quarter of1997. For the full year of 1998, diluted cash earnings per share, cash ROA and Cash ROE would have been $2.08, 1.92 percent and 31.76 percent,respectively, compared with $1.83, 1.78 percent and 30.49 percent,respectively, for the full year of 1997.
The following presentation of earnings by segment excludes the fourth quarter 1998 charges mentioned above. The Banking Group reported earnings of $2,484 million and $2,105 million for the full year of 1998and 1997, respectively, an increase of 18 percent. For the full year of 1998, Norwest Mortgage Banking reported record earnings of $217million, compared with $151 million a year ago, an increase of 44percent. Mortgage originations almost doubled to $109 billion, an industry record. Norwest Financial reported earnings of $210 million for the full year of 1998, compared with $243 million a year ago, a decrease of 14 percent. The domestic base business of Norwest Financial continues to improve. Credit losses continue to decline, and record volumes of new business were generated over the last several months.
Net interest income on a taxable-equivalent basis was $2,315 million in the fourth quarter of 1998, up from $2,195 million a year ago. The increase was primarily due to an increase in earning assets. For the full year1998, net interest income on a taxable-equivalent basis was $9,049million, compared with $8,705 million for the full year 1997. TheCompany's net interest margin for the fourth quarter of 1998 was 5.60percent, compared with 5.88 percent in the same quarter of 1997. Thenet interest margin for the full year of 1998 was 5.79 percent,compared with 5.86 percent for 1997.
Noninterest expense (NIE) in the fourth quarter of 1998 was $3,482 million, an increase of 54 percent from $2,258 million in the fourth quarter of1997. The increase was primarily due to the merger-related chargesmentioned previously. NIE totaled $10,579 million in 1998, compared with $8,990 million in 1997.
The loan loss provision was $624 million for the fourth quarter of 1998 and $1,545 million for the year, compared with $343 million and $1,140 million, respectively, for the same periods in 1997. Net charge-offs totaled $686 million, or 2.56 percent of average loans (annualized), in the fourth quarter of 1998, and $1,617 million, or 1.52 percent of average loans, for the full year. Net charge-offs totaled $339 million, or 1.29percent of average loans (annualized), for the fourth quarter of 1997,and $1,305 million, or 1.25 percent of average loans, for the full year. Losses for the quarter included approximately $300 million of losses in Island Finance reflecting a fourth quarter review of the loan portfolio. Results of the portfolio review reflected the recent deterioration of economic conditions in Puerto Rico. These problems have been compounded by recent hurricane damage in 1998. The Company is confident of the collectibility of the remaining portfolio. Losses also include approximately $60 million due to the realignment of charge-off policies in several business groups.
At December 31, 1998, the allowance for loan losses of $3,134 billion equaled 2.90 percent of total loans, compared with 2.94 percent atSeptember 30, 1998 and 2.88 percent at December 31, 1997. Total nonaccrual and restructured loans were $710 million at December 31,1998, compared with $722 million at September 30, 1998 and $715 millionat December 31, 1997. Other real estate was $173 million at December31, 1998, compared with $215 million at September 30, 1998 and $264million at December 31, 1997.
These forward-looking statements involve inherent risks and uncertainties. The Company cautions readers that a number of factors-many of which are beyond the control of the Company-could cause actual results to differ materially from those in the forward-looking statements. Among these factors are changes in political and economic conditions, interest rate fluctuations,technological changes (including the "Year 2000" data systems compliance issue), customer disintermediation, competitive product and pricing pressures in the Company's geographic and product markets,equity and fixed income market fluctuations, personal and commercial customers' bankruptcies, inflation, changes in law, changes in fiscal, monetary, regulatory and tax policies, monetary fluctuations, credit quality and credit risk management, mergers and acquisitions, the integration of merged and acquired companies, and success in gaining regulatory approvals when required.
Also,actual results may differ materially from those in the forward-looking statements because of factors relating to the combination of former Wells Fargo and Norwest Corporation, including the following: expected cost savings from the merger are not fully realized within the expected time frame or additional or unexpected costs are incurred; and costs or difficulties related to the integration of former Wells Fargo and Norwest Corporation are greater than expected.
News Release
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"We firmly believe this new company - which combines the best of both organizations - will become the premier financial services company in the United States and the leading banking franchise in the Midwest and Western United States," said Dick Kovacevich, president and chief executive officer of the new company. "Our customers, communities, shareowners and team members all will benefit from this merger with greater convenience and a broader array of products and services."
Added Kovacevich, "For our 15 million customers, nothing changes yet. Integrating systems is expected to take from six months to two years to complete. During the second half of next year, Norwest customers will begin seeing the Norwest name change to Wells Fargo on their stores,checks, statements and other materials."
Paul Hazen, chairman of Wells Fargo, said the key to a successful integration will be execution. "We're committed to the goal of doing it right so we can continue to provide outstanding customer service throughout the integration," he said. "Dozens of transition teams comprised of hundreds of team members are committed to making sure we begin every discussion with what's best for the customer and ensure the interests of our team members and shareholders are aligned. We're going to take our time. We're going to do it right."
The combined banking franchise has 2,859 stores and covers 21 states from California to Ohio. Norwest Mortgage - the nation's leading originator and servicer of mortgages - has 824 stores and a presence in all 50 states. Norwest Financial - the premier consumer finance company in the hemisphere - has 1,349 stores in 47 states, all 10 Canadian provinces,the Caribbean, Latin America, and elsewhere internationally.
As previously announced, Wells Fargo's Hazen is chairman, Norwest's Kovacevich is president and chief executive officer, Norwest's Les Biller is chief operating officer and vice chairman, and Wells Fargo's Rod Jacobs is chief financial officer and vice chairman. The four will work closely together and will be involved in all major decisions affecting the combined company.
Common stockholders of Wells Fargo receive 10 shares of common stock of Norwest in exchange for each share of Wells Fargo common stock.
Norwest's stock symbol NOB has been retired - stock of the new company will now trade under the symbol WFC. The two companies announced a definitive agreement June 8. The Board of Governors of the Federal Reserve system approved the merger October 14; stockholders of both companies approved the merger October 20.
Combined data (pro forma 9/30/98)
Assets (billions)
$196
Loans (billions)
$108
Deposits (billions)
$130
Net income (billions - ytd)
$2.1
Revenue (billions - ytd)
$15.3
*
Customers (millions)
15
Mortgage originations (billions - ytd)
$75
Mortgage servicing (billions)
$233
Credit card loans (billions)
$6
Consumer credit card accounts (millions)
4.
Stores
5,836
ATMs
6,065
Market capitalization (billions)
$58.3
Common shares outstanding (millions)
1,620
Net interest margin (ytd)
5.88%
Team members
101,591
This news release contains forward-looking statements with respect to financial conditions, results of operations and businesses of Wells Fargo, Norwest and the combined company including statements relatingto: (a) the cost savings and accretion to reported earnings that will be realized from the merger; (b) the impact on revenues of the merger; and (c) the restructuring charges expected to be incurred in connection with the merger. These forward looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) expected cost savings from the merger cannot be fully realized or realized within this expected time frame; (2) revenues following the merger are lower than expected; (3) competitive pressure among financial services companies increases significantly; (4) costs or difficulties related tothe integration of the businesses of Wells Fargo and Norwest are greater than expected; (5) changes in the interest rate environment reduce interest margins; (6) general economic conditions, either internationally or nationally or in the states in which the combined company will be doing business, are less favorable than expected; or(7) legislation or regulatory requirements or changes adversely affect the businesses in which the combined company would be engaged.