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					Company Report
Banks & Thrifts
January 20, 2010 | 9 Pages

WELLS FARGO & CO. (NYSE: WFC)
CORE EARNINGS MISS; PACE OF CREDIT DETERIORATION SLOWS; CAPITAL IMPROVES; MAINTAIN NEUTRAL
WFC reported 4Q09 earnings of $0.08 which included a number of one-time items. We excluded $1.9B of net MSR gains, $383M of securities gains, $450M in restructuring charges and a $261M settlement charge for auction rate securities to arrive at an operating loss of $0.16 vs. the consensus estimate of ($0.02) and our ($0.08) loss projection. Weaker core income negatively impacted results as lower revenues ($0.03) and higher operating expenses ($0.07) were somewhat offset by a lower tax rate (27% vs. 34%). Pace of credit deterioration slows – On a relative basis, the pace of NPL (excludes PCI loans) growth slowed increasing 17% vs. 32% in 3Q and 50% in 2Q. From an absolute perspective, the NPL increase fell to $3.5B from $5.1B in 3Q. NPAs increased $4.2B vs. $5.1B as OREO balances increased 25% LQ. Consumer loans (1-4 family & HELOC) accounted for $2.2B of the increase while CRE (primarily mortgage) produced the remaining $1.3B. NPLs/loans increased to 3.0% from 2.5% while NPAs/assets were 2.2% up from 1.9%. LLR build did not keep up with NPL growth again as coverage fell to 103% from 118%. NCOs were 2.6% vs. our 2.5% estimate and 2.4% in 3Q. Adjusting Estimates – We are lowering our 2010 estimate to $1.80 from $2.10 as a result of higher credit costs and a lower NIM given the quarterly result. Our 2011 falls to $2.38. We are reiterating our Neutral rating as the shares incorporate an appropriate premium given their improved capital levels and stronger pre-provision earnings power. The shares are currently trading at 2.2x TBV vs. peers at 1.7x. On a discounted normalized basis, the shares are trading at a reasonable 10.6x.
Earnings Summary 2010E EPS & P/E Summary 2010E 2010 Previous 2009 Previous $0.38 -$0.30 -$0.58 $0.42 -$0.58 $0.54 -$0.08 $0.57 $0.54 $1.36 $2.10 $1.80 --15.5
Rating: Price: Close Price Target: 52-wk Range: Market Capitalization (M): Shares Outstanding (M): Assets (M): Avg. Daily Vol. (000): Dividend: Dividend Yield: Book Value/Share: Price/Book Value:

RATING: NEUTRAL
Fiscal Year Ends Dec
Neutral $27.82 -$7.80-$31.53 $144,069.3 5178.6 $1,243,646 45,967,236 $0.20 0.7% $19.95 139% $12.67 220%

Tangible Book Value/Share: Price/Tangible Book Value:

Adam Barkstrom, CFA (800) 906-0577
abarkstrom@sterneagee.com

Blair Brantley, CFA (800) 621-8635
bbrantley@sterneagee.com

FYE Dec

2009E

2011E

EPS:

Q1 Q2 Q3 Q4 Full Year

P/E Ratio:

2009E $0.52 $0.55 $0.37 -$0.16 $1.29 21.6

2011E $0.57 $0.56 $0.61 $0.63 $2.38 11.7

2011 Previous $0.59 $0.59 $0.64 $0.66 $2.48 --

Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification, Investment Banking, Ratings Definitions, and potential conflicts of interest begin on Page I of the Appendix Section.

WELLS FARGO & CO. (NYSE: WFC)
WFC reported 4Q09 earnings of $0.08 which included a number of one-time items. We excluded $1.9B of net MSR gains, $383M of securities gains, $450M in restructuring charges and a $261M settlement charge for auction rate securities to arrive at an operating loss of $0.16 vs. the consensus estimate of ($0.02) and our ($0.08) loss projection. Weaker net interest income (-$0.01) and fee income (“other” category -$0.06) led to lower revenues of (-$0.03). Higher operating expenses (+$0.07) were driven by personnel and “other” (+$0.03 each). Provisioning was modestly higher (+$0.01) pushing operating results (-$0.11 per share) worse than expected. A lower tax rate (27% vs. 34%) aided results by $0.03 reducing the miss to (-$0.08) Pace of credit deterioration slows although metrics still weaken. On a relative basis, the pace of NPL (excludes PCI loans) growth slowed increasing 17% vs. 32% in 3Q and 50% in 2Q. From an absolute perspective, the NPL increase fell to $3.5B from $5.1B in 3Q. NPAs increased $4.2B vs. $5.1B as OREO balances increased 25% LQ. Consumer loans (1-4 family and HELOC) accounted for $2.2B of the increase while CRE (primarily mortgage) produced the remaining $1.3B. NPLs/loans increased to 3.0% from 2.5% while NPAs/assets were 2.2% up from 1.9%. LLR build did not keep up (+10 bps vs. our +13 bps estimate) with NPL growth again as coverage fell to 103% from 118%. NCOs were 2.6% vs. our 2.5% estimate and 2.4% in 3Q which resulted in provision expenses that was ($0.01) worse than expected at $5.9B vs. $5.8B. Absolute NCOs were $5.4B vs. our $5.2B estimate and up from $5.1B in 3Q. An area of focus is commercial and CRE NCOs which have steadily increased as a percentage of total NCOs from 26% at 2Q to 31% in 4Q. Specifically, CRE mortgage and construction NCOs have increased from 0.56% and 2.76% at 2Q to 1.32% and 4.82% at 4Q. While the company finds comfort in its $7B purchase accounting adjustment on the $18B of highest risk CRE loans it acquired, we continue to believe CRE expenses will likely increase from here and remain elevated for the near future. Overall, we expect the pace of credit deterioration will slow modestly but absolute expenses will remain above historical levels going into 2011. The company continues to expect consumer losses to peak in the first half of 2010 while commercial and CRE are expected to peak later in 2010 with recent results providing additional optimism. Non-impaired Pick-A-Pay loans experienced a deterioration in credit performance with NCOs rising to 2.85% from 2.57% in 3Q and 1.27% in 2Q while nonaccruals jumped again to 7.0% from 4.6% in 3Q and 2.2% in 2Q. 90+ also weakened increasing to 7.9% from 5.2% in 3Q and from 3.2% in 2Q. At quarter end, 13% of the portfolio was noncurrent (vs. 11% at 3Q) with an average LTV of 91% and an average FICO of 687. Although the increase in NCOs ($349M vs. $326M) was in line with management expectations and 30+ are reportedly stabilizing, we believe the level of deterioration in the quarter will likely lead to further increases in NCOs in the coming quarters. Impaired Pick-A-Pay – As of 4Q, 42% of the portfolio is non-current vs. 40% at 3Q and the average FICO is 583. Average LTV improved to 89% from 92%. Through YE09, the company has recognized $10.2B of the original $26.5B of PCI impairment taken on the Pick-A-Pay portfolio when acquired. Although the company expects the portfolio will perform better than originally estimated, we remain cautious given the aforementioned deterioration in the non-impaired portfolio and the still stressed environment. In our view and despite reported success in modifications within the impaired portfolio (31% in FY09), losses are likely to accelerate in both Pick-A-Pay

January 20, 2010

Page 2

WELLS FARGO & CO. (NYSE: WFC)
portfolios although the losses might take longer than usual to materialize given a long period until reset. Home Equity also showed increased credit stress with NCOs in the core portfolio rising to 3.9% from 3.7% in 3Q and 3.3% in 2Q. As to LTV, 48% of core home equity has a CLTV over 90%, flat with 3Q. Positively, losses were up a modest $42M vs. $123M in 3Q and $342M in 2Q. Management noted delinquencies were up 28 bps vs. +48 bps in 3Q on continued higher unemployment, the foreclosure moratorium and increased modification activity. In the liquidating portfolio, charge offs were flat at 12.2% with 82% of the portfolio having a CLTV over 90%. We feel both these portfolios will continue to see increased losses due to a large percentage having high CLTVs and being heavily exposed to California and Florida. NIM fell 5 bps to 4.31% (vs. our 4.41% estimate) from 4.36% in 3Q as strong deposit growth (+14% LQA) more than offset anemic loan demand (-6.5% LQA) resulting in excess liquidity being reinvested as smaller spreads. Net interest income was only down 1.5% however, as the company was able to maintain flattish AEA balances. The company has chosen to not play the carry trade game in the short run in order to optimally position themselves for higher rates (especially in the longer duration MBS) which will likely result in modest NIM improvement (weak loan demand) for the foreseeable future. We note the company is experiencing solid results in growing core deposits, specifically non-interest bearing deposits, which grew +9.8% LQ. Operating expenses higher than expected. Relative to our estimate, operating expenses decreased EPS by $0.07 as both the personnel ($150M of 401k profit sharing) and “other” (OREO and environmental costs) line items each contributed -$0.03. Overall, operating expenses were up 5.5% LQ. Estimated cumulative merger integration costs (which we exclude from operating results) have been lowered again to $5.0B from $5.5B in 3Q and the previous $7.9B estimate to reflect lower OREO write-downs and lower estimated severance costs due to attrition. Merger related savings estimates were reconfirmed to be $5B annually upon integration in 2011. Fee income was below expectations (-$0.02) as “other” was partially offset by stronger trust fees, mortgage banking (excluding positive MSR and hedging valuations) and insurance. Although the pipeline appears to remain solid for mortgage banking, we expect fee income to be flattish as growth in trust and insurance offset normalizing mortgage returns. TCE improves following capital raise. Following the company’s $12.2B common raise in 4Q, which was used to pay back $25B of TARP as well as pay off the PRU put ($4.5B), TCE improved to 5.4% from 4.5%. Given our current earnings projections coupled with little balance sheet growth (weak loan demand) we project TCE will improve to the mid 6% range in 2011. Although TARP has been repaid and the company is projected to be profitable going forward, we do not expect the dividend to be increased until capital levels improve further and more clarity is achieved regarding credit.

January 20, 2010

Page 3

WELLS FARGO & CO. (NYSE: WFC)

January 20, 2010

Wells Fargo & Co. Quarterly Income Statement
Wells Fargo & Co. ($/M M except p er share data)
FAS 142 ESTIMATES

4Q09 Change FY2008A $0.70 $0.72 $1.30 $16.02 $7.01 4228.6 3391.0 1Q09A $0.56 $0.52 $0.34 $16.16 $7.12 4261.4 4249.3 2Q09A $0.57 $0.55 $0.05 $17.81 $9.52 4668.1 4501.6 3Q09A $0.56 $0.37 $0.05 $19.35 $11.34 4679.2 4706.4 4Q09A $0.08 ($0.16) $0.05 $19.95 $12.67 5178.6 4796.1 FY2009E $1.75 $1.29 $0.49 $19.95 $12.67 5178.6 4563.4 1Q10E $0.20 $0.30 $0.05 $20.10 $12.82 5178.6 5178.6 2Q10E $0.32 $0.42 $0.05 $20.37 $13.09 5178.6 5178.6 3Q10E $0.44 $0.54 $0.05 $20.76 $13.48 5178.6 5178.6 4Q10E $0.48 $0.54 $0.05 $21.19 $13.91 5178.6 5178.6 FY2010E $1.45 $1.80 $0.20 $21.19 $13.91 5178.6 5178.6 1Q11E $0.54 $0.57 $0.05 $21.68 $14.40 5178.6 5178.6 2Q11E $0.53 $0.56 $0.05 $22.16 $14.88 5178.6 5178.6 3Q11E $0.58 $0.61 $0.05 $22.69 $15.41 5178.6 5178.6 4Q11E $0.60 $0.63 $0.05 $23.24 $15.96 5178.6 5178.6 FY2011E $2.25 $2.38 $0.20 $23.24 $15.96 5178.6 5178.6 09/08 150.6% 78.5% -62.3% 24.5% 80.8% 22.5% 34.6% 10/09 -17.5% 39.3% -59.2% 6.2% 9.8% 0.0% 13.5% 11/10 55.7% 32.4% 0.0% 9.7% 14.7% 0.0% 0.0% Q/Q -85.3% -141.9% 0.0% 3.1% 11.7% 10.7% 1.9% Y/Y -109.8% -82.3% -85.3% 24.5% 80.8% 22.5% 33.5%

GAAP EPS Operating EPS Cash Dividends Per Share Book Value Per Share Tangible Book Per Share EOP Shares Out. Average FD Shares Out. Income S tatement Net Interest Margin Average Earning Assets Net Interest Income *+ Taxable Equivalent Adj. Net Interest Income (FTE) Non-interest Income: Service charges on deposits Trust and investment fees Card Fees Other charges and fees M ortgage Banking Insurance Net gains (losses) on debt securities Net gains (losses) on equity securities Other noninterest income Total non-interest income Total Revenues Non-interest Expense: Personnel expense Occupancy and equipment expense Other non-interest expense Total non-interest Expenses Total Core Income: Provision for Loan Losses Operating Income Other Items: Securities gains (losses) M SR & Other Fair Value Adjustments M erger/Restructuring/Other Income before taxes Income taxes Net Income Dividends on Preferred Net income (loss) on non-controlling interests Net Income Available To Common Balance Sheet EOP LOANS EOP INVESTM ENT SEC. EOP OTHER ASSETS EOP INTANGIBLES EOP ASSETS EOP NON-INT. BEARING EOP TOTAL DEPOSITS EOP BORROWINGS EOP TANGIBLE EQUITY EOP TOTAL EQUITY EOP PREFERRED EOP COM MON EQUITY EOP TANGIBLE COMM ON EQUITY AVG LOANS AVG INV SECURITIES AVG ASSETS AVG NON-INT BEARING AVG DEPOSITS AVG BORROWINGS AVG TANGIBLE EQUITY AVG TOTAL EQUITY AVG COMM ON EQUITY Performance Ratios (Based on Averages) Earning Assets / Assets Investment Sec. / Assets Borrowings/Assets [EOP] Borrowings/Equity [EOP] Loans / Assets Loans / Deposits NonInt. Dep / Total Dep. [EOP] Tang Common Eqty /Tang Assets [EOP] Tang Eqty/Tang Assets [EOP] Tot. Equity / Assets [EOP] Core Income / Assets Return on Assets Return on Common Equity Operating Exp. / Revenues Operating Exp. / Assets Fee Income / Assets Fee Income / Revenues Deposit Fees / Deposits Effective Tax Rate (FTE) Common Div. Pay out ratio NCOs/Average Loans Reserves/NPLoans Reserves/Loans NPLs/Loans NPAs/Assets NPAs/TE+LLR [EOP]

4.83% 523389 25143 288 25431

4.16% 1107442 11376 171 11547

4.30% 1108741 11764 176 11940

4.36% 1085060 11684 177 11861

4.31% 1085622 11500 182 11682

4.28% 1096716 46324 706 47030

4.31% 1080018 11358 279 11637

4.32% 1076162 11344 279 11623

4.35% 1076821 11429 281 11710

4.35% 1082846 11493 283 11776

4.33% 1078962 45624 1122 46746

4.35% 1091578 11586 285 11871

4.35% 1103961 11717 288 12006

4.35% 1119201 11879 292 12171

4.35% 1136507 12063 297 12360

4.35% 1112812 47246 1162 48407

-11.2% 109.5% 84.2% 84.9%

1.2% -1.6% -1.5% -0.6%

0.4% 3.1% 3.6% 3.6%

-1.1% 0.1% -1.6% 2.8% -1.5%

-12.0% 98.2% 71.0% 50.4% 70.7%

3190 2924 2336 2097 2767 1830 0 0 1552 16696 42127

1394 2215 853 901 1629 581 0 0 1469 9042 20589

1448 2413 923 963 2046 595 0 0 1393 9781 21721

1478 2502 946 950 1567 468 0 0 1382 9293 21154

1421 2605 961 990 1511 482 0 0 943 8913 20595

5741 9735 3683 3804 6753 2126 0 0 5187 37029 84059

1477 2735 980 1000 1519 521 0 0 952 9184 20821

1492 2769 1000 1010 1526 531 0 0 962 9290 20913

1507 2811 1020 1020 1541 504 0 0 972 9375 21086

1522 2853 1040 1030 1557 489 0 0 981 9473 21249

5998 11169 4040 4060 6143 2045 0 0 3867 37323 84069

1537 2896 1061 1040 1572 528 0 0 991 9627 21498

1553 2939 1082 1051 1596 539 0 0 1001 9761 21767

1568 2998 1104 1061 1628 512 0 0 1011 9883 22054

1584 3058 1126 1072 1660 497 0 0 1021 10018 22378

6242 11892 4373 4225 6457 2076 0 0 4024 39289 87696

80.0% 232.9% 57.7% 81.4% 144.1% 16.2%

4.5% 14.7% 9.7% 6.7% -9.0% -3.8%

4.1% 6.5% 8.2% 4.1% 5.1% 1.5%

-3.9% 4.1% 1.6% 4.2% -3.6% 3.0%

77.0% 294.1% 63.2% 85.0% 900.7% 43.0%

234.2% 121.8% 99.5%

-25.4% 0.8% 0.0%

4.1% 5.3% 4.3%

-31.8% -4.1% -2.6%

-1147.8% 198.5% 109.5%

12940 2976 6682 22598 19529 15979 3550 280 (242) 0 3588 890 2698 (286) 43 2369

6494 1483 3635 11612 8977 4558 4419 (276) 875 (206) 4812 1723 3089 (661) 44 2384

6725 1358 3805 11888 9833 5086 4747 (38) 1000 (809) 4900 1651 3249 (597) (77) 2575

6513 1341 3630 11484 9670 6111 3559 (11) 1500 (200) 4848 1532 3316 (598) (81) 2637

6735 1451 3924 12110 8485 5913 2572

26467 5633 14994 47094 36965 21668 15297 58 5275 (1926) 18704 6037 12667 (4285) (304) 7990

6937 1466 3983 12385 8436 5823 2613 0 0 (750) 1863 633 1229 (184) 0 1045

6972 1480 4043 12495 8418 4843 3575 0 0 (750) 2825 961 1865 (184) 0 1681

7076 1502 4103 12682 8404 3918 4486 0 0 (750) 3736 1270 2466 (184) 0 2282

7218 1532 4185 12936 8313 3783 4530 0 0 (500) 4030 1370 2660 (184) 0 2476

28203 5980 16314 50497 33571 18368 15204 0 0 (2750) 12454 4234 8219 (736) 0 7483

7434 1563 4269 13266 8231 3504 4727 0 0 (250) 4477 1522 2955 (184) 0 2771

7472 1594 4354 13420 8346 3642 4704 0 0 (250) 4454 1514 2940 (184) 0 2756

7584 1626 4441 13651 8403 3317 5086 0 0 (250) 4836 1644 3191 (184) 0 3007

7735 1659 4530 13924 8453 3199 5255 0 0 (250) 5005 1702 3303 (184) 0 3119

30225 6442 17595 54262 33434 13662 19772 0 0 (1000) 18772 6382

104.5% 89.3% 124.4% 108.4% 89.3% 35.6% 330.9%

6.6% 6.2% 8.8% 7.2% -9.2% -15.2% -0.6%

7.2% 7.7% 7.9% 7.5% -0.4% -25.6% 30.0%

3.4% 8.2% 8.1% 5.5% -12.3% -3.2% -27.7%

112.0% 77.0% 116.4% 108.4% 111.0% -30.0% -158.2%

383 1900 (711) 4144 1131 3013 (2429) (190) 394

421.3% 578.3%

-33.4% -29.9% -35.1% -82.8% -6.3%

50.7% 50.7% 50.7% 0.0% 55.7%

-14.5% -26.2% -9.1% 306.2% 134.6% -85.1%

-189.0% -159.1% -209.9% 749.3% 2614.3% -113.0%

12389 369.5% (736) 1398.3% 0 11653 237.3%

891406.0 255886.0 124219.0 38128.0 1309639.0 150837.0 797269.0 375232.0 60956.0 99084.0 31332.0 67752.0 29624.0 425203.1 118420.5 609104.9 88495.3 353574.8 200925.5 37160.9 53412.9 49590.0

888692.0 243590.0 115072.0 38537.0 1285891.0 166497.0 797269.0 322734.0 61758.0 100295.0 31411.0 68884.0 30347.0 894598.0 249738.0 1289716.0 160308.0 795719.0 335025.0 61357.0 104628.0 68318.0

869018.0 262881.0 113577.0 38700.0 1284176.0 173149.0 813735.0 284899.0 75923.0 114623.0 31497.0 83126.0 44426.0 884310.0 253235.5 1274926.0 174529.0 812540.0 295434.0 68840.5 107459.0 76005.0

841336.0 244503.0 105286.0 37500.0 1228625.0 165260.0 796748.0 245092.0 84650.0 122150.0 31589.0 90561.0 53061.0 855770.0 253692.0 1246051.0 172588.0 805941.0 262408.0 80286.5 118386.5 86843.5

827597.0 256634.0 121715.0 37700.0 1243646.0 181536.0 824018.0 101408.0 74086.0 111786.0 8485.0 103301.0 65601.0 832294.0 250568.5 1239456.0 179204.0 816015.0 243464.0 79368.0 129332.0 96931.0

827597.0 256634.0 121715.0 37700.0 1243646.0 181536.0 824018.0 101408.0 74086.0 111786.0 8485.0 103301.0 65601.0 866743.0 251808.5 1262537.3 171657.3 807553.8 284082.8 72463.0 114951.4 82024.4

819321.0 259200.3 122932.2 37700.0 1239153.5 183351.4 832258.2 102422.1 74872.4 112572.4 8485.0 104087.4 66387.4 823459.0 257917.2 1241399.8 182443.7 828138.1 101915.0 74479.2 112179.2 103694.2

811127.8 261792.3 124161.5 37700.0 1234781.6 185184.9 840580.8 103446.3 76294.0 113994.0 8485.0 105509.0 67809.0 815224.4 260496.3 1236967.6 184268.1 836419.5 102934.2 75583.2 113283.2 104798.2

813155.6 264410.3 125403.1 37700.0 1240669.0 187036.7 848986.6 104480.8 78316.6 116016.6 8485.0 107531.6 69831.6 812141.7 263101.3 1237725.3 186110.8 844783.7 103963.5 77305.3 115005.3 106520.3

817221.4 267054.4 126657.1 37700.0 1248632.9 188907.1 857476.4 105525.6 80533.6 118233.6 8485.0 109748.6 72048.6 815188.5 265732.3 1244650.9 187971.9 853231.5 105003.2 79425.1 117125.1 108640.1

817221.4 267054.4 126657.1 37700.0 1248632.9 188907.1 857476.4 105525.6 80533.6 118233.6 8485.0 109748.6 72048.6 816503.4 261811.8 1240185.9 185198.6 840643.2 103454.0 76698.2 114398.2 105913.2

825393.6 269724.9 127923.7 37700.0 1260742.2 190796.2 866051.2 106580.8 83045.7 120745.7 8485.0 112260.7 74560.7 821307.5 268389.6 1254687.6 189851.6 861763.8 106053.2 81789.6 119489.6 111004.6

837774.5 272422.2 129202.9 37700.0 1277099.6 192704.1 874711.7 107646.6 85542.6 123242.6 8485.0 114757.6 77057.6 831584.1 271073.5 1268920.9 191750.1 870381.5 107113.7 84294.1 121994.1 113509.1

852435.6 275146.4 130495.0 37700.0 1295776.9 194631.2 883458.8 108723.1 88291.1 125991.1 8485.0 117506.1 79806.1 845105.1 273784.3 1286438.3 193667.6 879085.3 108184.9 86916.9 124616.9 116131.9

869484.3 277897.8 131799.9 37700.0 1316882.1 196577.5 892293.4 109810.3 91151.3 128851.3 8485.0 120366.3 82666.3 860959.9 276522.1 1306329.5 195604.3 887876.1 109266.7 89721.2 127421.2 118936.2

869484.3 277897.8 131799.9 37700.0 1316882.1 196577.5 892293.4 109810.3 91151.3 128851.3 8485.0 120366.3 82666.3 839739.2 272442.4 1279094.1 192718.4 874776.7 107654.6 85680.5 123380.5 114895.5

-7.2% 0.3% -2.0% -1.1% -5.0% 20.4% 3.4% -73.0% 21.5% 12.8% -72.9% 52.5% 121.4% 103.8% 112.6% 107.3% 94.0% 128.4% 41.4% 95.0% 115.2%

-1.3% 4.1% 4.1% 0.0% 0.4% 4.1% 4.1% 4.1% 8.7% 5.8% 0.0% 6.2% 9.8% -5.8% 4.0% -1.8% 7.9% 4.1% -63.6% 5.8% -0.5%

6.4% 4.1% 4.1% 0.0% 5.5% 4.1% 4.1% 4.1% 13.2% 9.0% 0.0% 9.7% 14.7% 2.8% 4.1% 3.1% 4.1% 4.1% 4.1% 11.7% 7.9%

-1.6% 5.0% 15.6% 0.5% 1.2% 9.8% 3.4% -58.6% -12.5% -8.5% -73.1% 14.1% 23.6% -2.7% -1.2% -0.5% 3.8% 1.2% -7.2% -1.1% 9.2%

-7.2% 0.3% -2.0% -1.1% -5.0% 20.4% 5.5% -73.0% 21.5% 12.8% -72.9% 52.5% 121.4% 89.8% 39.2% 95.7% 96.4% 121.7% -14.2% 69.3% 84.1%

85.9% 19.4% 33.0% 554% 69.8% 120.3% 18.9% 2.3% 4.8% 7.6% 3.2% 0.39% 4.8% 53.6% 3.7% 2.7% 39.6% 0.90% 24.8% 186.1% 1.84% 319% 2.44% 0.76% 0.69% 10.9%

85.9% 19.4% 25.1% 469% 69.4% 112.4% 20.9% 2.4% 5.0% 7.8% 2.8% 0.74% 14.0% 56.4% 3.6% 2.8% 43.9% 0.70% 35.8% 60.6% 1.46% 217% 2.57% 1.2% 1.0% 14.9%

87.0% 19.9% 22.2% 343% 69.4% 108.8% 21.3% 3.6% 6.1% 8.9% 3.1% 0.81% 13.6% 54.7% 3.7% 3.1% 45.0% 0.71% 33.7% 8.7% 1.98% 149% 2.71% 1.82% 1.43% 18.4%

87.1% 20.4% 19.9% 271% 68.7% 106.2% 20.7% 4.5% 7.1% 9.9% 3.1% 0.85% 12.1% 54.3% 3.7% 3.0% 43.9% 0.73% 31.6% 8.9% 2.39% 118% 2.92% 2.48% 1.91% 21.5%

87.6% 20.2% 8.2% 98% 67.1% 102.0% 22.0% 5.4% 6.1% 9.0% 2.7% 0.13% 1.6% 58.8% 3.9% 2.9% 43.3% 0.70% 27.3% 60.9% 2.60% 103% 3.02% 2.95% 2.22% 27.9%

86.9% 19.9% 22.5% 98% 68.7% 107.3% 22.0% 5.4% 6.1% 9.0% 2.9% 0.63% 9.7% 56.0% 3.7% 11.7% 44.1% 0.71% 32.3% 28.0% 2.10% 3.02%

87.0% 20.8% 8.3% 98% 66.3% 99.4% 22.0% 5.5% 6.2% 9.1% 2.7% 0.34% 4.0% 59.5% 4.0% 3.0% 44.1% 0.71% 34.0% 24.8% 2.65% 3.10%

87.0% 21.1% 8.4% 98% 65.9% 97.5% 22.0% 5.7% 6.4% 9.2% 2.7% 0.54% 6.4% 59.7% 4.0% 3.0% 44.4% 0.71% 34.0% 15.4% 2.70% 3.05%

87.0% 21.3% 8.4% 97% 65.6% 96.1% 22.0% 5.8% 6.5% 9.4% 2.7% 0.74% 8.6% 60.1% 4.1% 3.0% 44.5% 0.71% 34.0% 11.3% 2.50% 2.90%

87.0% 21.3% 8.5% 96% 65.5% 95.5% 22.0% 5.9% 6.7% 9.5% 2.7% 0.80% 9.1% 60.9% 4.2% 3.0% 44.6% 0.71% 34.0% 10.5% 2.40% 2.75%

87.0% 21.1% 8.3% 96% 65.8% 97.1% 22.0% 5.9% 6.7% 9.5% 2.7% 0.60% 7.1% 60.1% 4.1% 12.0% 44.4% 0.71% 34.0% 13.8% 2.56% 2.75%

87.0% 21.4% 8.5% 95% 65.5% 95.3% 22.0% 6.1% 6.8% 9.6% 2.6% 0.88% 10.0% 61.7% 4.2% 3.1% 44.8% 0.71% 34.0% 9.3% 2.20% 2.60%

87.0% 21.4% 8.4% 94% 65.5% 95.5% 22.0% 6.2% 6.9% 9.7% 2.6% 0.87% 9.7% 61.7% 4.2% 3.1% 44.8% 0.71% 34.0% 9.4% 2.00% 2.50%

87.0% 21.3% 8.4% 93% 65.7% 96.1% 22.0% 6.3% 7.0% 9.7% 2.6% 0.94% 10.4% 61.9% 4.2% 3.1% 44.8% 0.71% 34.0% 8.6% 1.80% 2.40%

87.0% 21.2% 8.3% 91% 65.9% 97.0% 22.0% 6.5% 7.1% 9.8% 2.6% 0.96% 10.5% 62.2% 4.3% 3.1% 44.8% 0.71% 34.0% 8.3% 1.70% 2.30%

87.0% 21.3% 8.4% 91% 65.7% 96.0% 22.0% 6.5% 7.1% 9.8% 2.6% 0.91% 10.1% 61.9% 4.2% 12.3% 44.8% 0.71% 34.0% 8.9% 1.92% 2.30%

Source: Company reports and Sterne Agee estimates

Page 4

WELLS FARGO & CO. (NYSE: WFC)

January 20, 2010

APPENDIX SECTION
Company Description: Founded in 1852 in San Francisco, Wells Fargo & Company has grown into one of the nation's largest financial services companies with $1.3 trillion in assets and provides banking, insurance, investments, mortgage and consumer finance through more than 11,000 branches, 12,359 ATMs, the internet and other distribution channels across North America and internationally. IMPORTANT DISCLOSURES: Price Target Risks & Related Risk Factors:
Investment risks associated with the achievement of target prices consist of developments which could cause earnings to come in lower than expectations. For bank and thrift institutions we believe the most serious risk is the potential for loan credit quality to deteriorate thereby obviating a higher provision for loan losses to cover an immediate loan charge-off or to build a higher loan loss reserve to absorb a potential loss. The higher the degree of geographic focus, the greater the risk that worsening economic circumstances could have an adverse impact on loan portfolio quality. Also, a higher degree of concentration in a specific type of loans or borrowers increases the potential for a large adverse impact on earnings. Banks and thrift institutions are also subject to interest rate sensitivity risks. Depending upon how the balance sheet is structured, increases or decreases in rates could reduce earnings. Additionally, regardless of how the balance sheet is positioned, a volatile interest rate environment could have an adverse impact on earnings. Depository institutions also possess compliance and operating risk such as the implementation of policies, procedures and controls required by the Bank Secrecy Act and U.S. Patriot Act. Failure to comply fully and effectively with these laws and other regulatory regimes could result in high fines and restrictions on the institution's freedom of action. Another prominent risk associated with bank and thrift stocks involves the potential for overpaying for an acquisition or an ineffective integration once an acquisition is closed. Paying too much for an acquisition or failing to properly integrate the acquired franchise could reduce earnings. For a complete discussion of the risk factors that could affect the market price of a company's shares, refer to the most recent Form 10Q or 10-K that a company has filed with the Securities and Exchange Commission.

Valuation Methodology:
Our ratings are based on a wide array of valuation methodology. Our "top-down" valuation approach makes extensive use of peer groups based on market capitalization, asset size, geographic location or the nature of the institution. We compare various valuation metrics to the peer group. Relevant valuation metrics include, but are not limited to, price to earnings (trailing twelve month as well as estimates), price to book value, price to tangible book value, dividend yield and several types of deposit premiums. Our "bottomup" valuation process examines the specific geographic franchise, management experience and record, credit culture, deposit composition, loan portfolio characteristics and interest rate sensitivity to aid in determining the overall prospects for the institution. At this level we sometimes employ discounted cash flow analysis to the specific institution. Another valuation process we go through attempts to determine the value of a depository institution as an acquisition. This requires judgments with regard to potential buyers and their wherewithal to purchase the candidate.

Regulation Analyst Certification:
I, Adam Barkstrom, CFA, hereby certify the views expressed in this research report accurately reflect my personal views about the subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this report. Sterne, Agee & Leach, Inc. Disclosure Legend as of January 20, 2010: Company Wells Fargo & Co. (WFC - NYSE): 1. 2. 3. 4. 5. 6. Disclosure(s) – See Below 1, 6

Sterne, Agee & Leach, Inc. makes a market in the shares of the subject company. Sterne, Agee & Leach, Inc. has, over the past 12 months, managed or co-managed a public securities offering or provided other investment banking services for the subject company. Sterne, Agee & Leach, Inc. has various security accounts open for the subject company. Sterne, Agee & Leach, Inc. provides administration for 401(k) plans for the subject company. Sterne Agee Financial Services, Inc. has clearing agreements with the subject company. The Sterne Agee analyst who has active coverage on this company owns a position in the subject company.

Sterne, Agee & Leach, Inc.’s research analysts receive compensation that is based upon various factors, including Sterne, Agee & Leach, Inc.’s total revenues, a portion of which is generated by investment banking activities.

Appendix Section, Page I

WELLS FARGO & CO. (NYSE: WFC)

January 20, 2010

Definition of Investment Ratings:
BUY: NEUTRAL: SELL: RESTRICTED: We expect this stock to outperform the industry over the next 12 months. We expect this stock to perform in line with the industry over the next 12 months. We expect this stock to underperform the industry over the next 12 months. Restricted list requirements preclude comment.

Ratings Distribution:
Of the securities rated by Sterne, Agee & Leach, Inc., as of December 31, 2009, 41.3% had a BUY rating, 54.4% had a NEUTRAL rating, 4.3% had a SELL rating, and 0% was RESTRICTED. Within those ratings categories, 2.04% of the securities rated BUY, 1.94% rated NEUTRAL, 0% rated SELL, and 0% rated RESTRICTED received investment banking services from Sterne, Agee & Leach, Inc., within the 12 months preceding December 31, 2009.

ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.
Other Disclosures: Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Sterne, Agee & Leach, Inc., its affiliates, or one or more of its officers, employees, or consultants may, at times, have long or short or options positions in the securities mentioned herein and may act as principal or agent to buy or sell such securities. Copyright © 2010 Sterne, Agee & Leach, Inc. All Rights Reserved. Sterne, Agee & Leach, Inc. disclosure price charts are updated within the first fifteen days of each new calendar quarter per FINRA regulations. Price charts for companies initiated upon in the current quarter, and rating and target price changes occurring in the current quarter, will not be displayed until the following quarter.

Price Chart(s):

To receive price charts or other disclosures on the companies mentioned in this report, please contact Sterne, Agee & Leach, Inc. tollfree at (800) 966-0814 or (205) 949-3689.

Appendix Section, Page II

STERNE, AGEE & LEACH, INC.
Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for over a century. During the early years, our founders prominently established themselves in the financial securities industry in the southeastern United States. Today, we have expanded to serve all regions of the country. Sterne, Agee is headquartered in Birmingham, Alabama with offices in 22 states including Alabama, Arkansas, California, Florida, Georgia, Illinois, Kentucky, Louisiana, Maine, Massachusetts, Minnesota, Mississippi, Missouri, New Jersey, New York, North Carolina, Pennsylvania South Carolina, Tennessee, Texas, Virginia, and Wisconsin. Sterne Agee is one of the largest independent firms in the country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee Group, Inc., which also includes The Trust Company of Sterne, Agee & Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee Financial Services, Inc.—www.sterneagee.com

EQUITY CAPITAL MARKETS ADMINISTRATION
Ryan Medo Robert Lake Managing Dir., Eq. Cap. Mkts. Vice President (205) 949-3623 (205) 949-3624 David Lee Yan Chao Chuck Carlisle Director, Equity Products Associate Sr. Portfolio Analyst (205) 949-3689 (205) 949-3622 (205) 949-3571

EQUITY RESEARCH
Robert Hoehn Director of Research (212) 338-4731

BASIC MATERIALS
Mark Connelly Ashish Gupta Jason Marcus Mng. Dir. Analyst Associate (212) 338-4712 (212) 338-4721 (212) 338-4746

FINANCIAL SERVICES (CONT.)
Matthew Breese Edward D. Timmons Brett Rabatin, CFA Kenneth James Peyton Green Michael Lipman Analyst SVP, Sr. Analyst SVP, Sr. Analyst Analyst Mng. Dir. Analyst (207) 699-5800 (800) 203-5332 (877) 457-8625 (615) 760-1474 (877) 492-2663 (615) 269-7323

CONSUMER Apparel Retailing & Toys
Margaret Whitfield Jennifer Milan SVP, Sr. Analyst VP, Analyst (973) 519-1019 (212) 763-8211

Life Insurance
John M. Nadel Jason Weyeneth, CFA Dennis Zavolock Mng. Dir. Analyst Associate (212) 338-4717 (212) 763-8293 (212) 338-4748

Educational Services / Interactive Entertainment
Arvind Bhatia, CFA Luke Shagets Mng. Dir. Analyst (214) 702-4001 (214) 702-4030

Mortgage Finance & Specialty Finance
Henry J. Coffey, Jr., CFA John Sites, CFA SVP, Sr. Analyst Associate (615) 760-1472 (615) 760-1470

Footwear & Apparel
Sam Poser Kenneth M. Stumphauzer SVP, Sr. Analyst Analyst (212) 763-8226 (212) 763-8287

Leisure & Entertainment
David Bain Sherry Yin Mng. Dir. Associate (949) 721-6651 (949) 721-6651

GLOBAL INDUSTRIAL INFRASTRUCTURE (GII) ACME &Latin America
Lawrence T. De Maria, CFA Ben Elias, CFA SVP, Sr. Analyst VP, Sr. Analyst (212) 338-4704 (212) 338-4706

Restaurants
Lynne Collier Philip May Mng. Dir. Analyst (214) 702-4045 (214) 702-4004

Building, Power & Water Infrastructure
Michael J. Coleman, CFA VP, Sr. Analyst (212) 338-4718

Engineering and Construction
Chase Jacobson VP, Sr. Analyst (212) 338-4753

ENERGY Oilfield Services & Equipment
David S. Havens Karl Sowislo Mng. Dir. Analyst (212) 763-8238 (212) 338-4732

Multi-Industry
Nicholas P. Heymann Samuel H. Eisner Jordan Calabrese Paul A. Dircks Mng. Dir. Analyst Associate Analyst (212) 338-4703 (212) 338-4705 (212) 338-4729 (212) 338-4725

Exploration & Production
Adam Aron VP, Analyst (212) 338-4748

TRANSPORTATION, SERVICES & EQUIPMENT FINANCIAL SERVICES Banks & Thrifts
James M. Schutz John Schutz Adam Barkstrom, CFA Blair Brantley, CFA Matthew Kelley Mike I. Shafir Dir. of Fin. Ser. Associate Mng. Dir. Analyst Mng. Dir. VP, Sr. Analyst (864) 241-3384 (502) 420-4015 (800) 906-0577 (800) 621-8635 (207) 699-5800 (212) 763-8239 Jeffrey A. Kauffman Sal Vitale Mng. Dir. Analyst (212) 338-4765 (212) 338-4766

ADMINISTRATION
Carlo Francisco Marianne Pence Nathan Mitchell Elizabeth Koch Supervisory Analyst Mgr., Res. Admin. Editor Editor (914) 434-3451 (205) 949-3618 (205) 949-3635 (615) 289-4122

Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)

SALES & TRADING
Steve Pokorny JT Cacciabaudo Head of Institutional Sales Head of Trading (214) 702-4020 (212) 763-8288

ATLANTA
Adam Aspes Adam Kramer Joe Maloney Jamie Pennington John T. Riley (404) 812-3068 (404) 814-3902 (404) 814-3942 (404) 814-3948 (404) 814-3966

DALLAS
Jennifer Elkins Mary Foster Dan Griffith Candace Martin Bob Nasi John Schwalenberg (214) 702-4050 (214) 702-4009 (214) 702-4044 (214) 702-4033 (214) 702-4017 (214) 702-4010

NEW YORK (cont.)
Brian Haise Jeff Hood Alex Jones Carey Kaufman Konrad Krill Robert McGuire Adam Merlo John Molster Jake Morton Michael Newman Matt O’Kelly David O’Shea Jon Palan Bruce Rae Jon Schenk Chuck Schroeder Jason Scott Miko Tam Scott Tashman (212) 763-8206 (212) 490-1453 (212) 338-4701 (212) 763-8274 (212) 763-8218 (212) 763-8236 (212) 763-8232 (212) 763-8210 (212) 763-8261 (212) 763-8258 (212) 763-8227 (212) 763-8260 (212) 763-8225 (212) 763-8271 (212) 763-8221 (212) 763-8264 (212) 763-8215 (212) 763-8252 (212) 763-8256

BIRMINGHAM
Gary Hagstrom Sam Haskell Scott Hughen Claude Preston Amber Spitzer (205) 380-1782 (205) 380-1781 (205) 380-1764 (205) 380-1762 (205) 380-1761

MINNEAPOLIS
Randy Mason John Regan III (952) 820-4461 (952) 841-6408

NEW ORLEANS
Patrick Donnelly Cheryl Grabert John Regan, Jr. (504) 636-4902 (504) 636-4911 (850) 650-5676

BOSTON
Richard Gill Tom Goode Ian Moran Ted Sheehan Mike Roncone Nicholas White (617) 478-5006 (617) 478-5008 (617) 478-5003 (617) 478-5003 (617) 478-5001 (617) 478-5002

NEW YORK
Jason Barber Adam Cavise Mike Cline Tom Criscoula Noel Cueto Enrico DeMatt Geri DeVito Eric Dusansky Mike Flanagan Rich Gallagher (212) 763-8219 (212) 763-8292 (212) 763-8268 (212) 338-4719 (212) 763-8251 (212) 338-4724 (212) 763-8242 (212) 763-8231 (212) 763-8282 (212) 763-8260

SAN FRANCISCO
Justin Brennan Tom Cervantez Chris Larson Naghmeh Rabii Rob Salomon (415) 362-6140 (415) 362-7430 (415) 362-6142 (415) 362-6141 (415) 362-7432

CHICAGO
Mark Burrier Jennifer Crall Scott Hallermann Scott Hootman Robert Hurley Vesna Radovic Dan Roesner Curt Thompson (312) 525-8425 (312) 525-8423 (312) 525-8421 (312) 525-8426 (312) 525-8440 (312) 525-8429 (312) 525-8433 (312) 525-8427

INVESTMENT BANKING
Mark Behrman, Mng. Dir. (212) 763-8286 Kimberlee Taylor, Admin. Asst. (212) 338-4715

FINANCIAL INSTITUTIONS GROUP
Michael J. O’Boyle, Mng. Dir. Michael Perry, Mng. Dir. Robert P. Hutchinson, Mng. Dir. Jeffrey W. Prochnow, CFA, SVP D. Timothy Speegle, SVP John McCrory, SVP Robert Toma, VP Horacio Barakat, VP Andrew Stager, Associate Nathan Strall, Associate Jung Lee, Associate Michael Stern, Analyst (205) 949-3592 (212) 338-4736 (617) 478-5011 (402) 778-5054 (205) 380-1720 (205) 949-3664 (617) 478-5005 (212) 338-4768 (617) 478-5009 (617) 478-5010 (212) 338-4769 (212) 338-4756

NON-FINANCIALS
John Bolebruch, Mng. Dir. – Industrials Richard Cunniffe, SVP – Industrials Everett Titus III, Mng. Dir – Energy Will Brooke, Analyst - Industrials (212) 338-4716 (212) 338-4713 (908) 730-7882 (212) 763-8278

EQUITY SYNDICATE
Craig B. Jampol, Mng. Dir. (212) 338-4708

Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)

LOCATIONS
Corporate Headquarters 800 Shades Creek Parkway Suite 700 Birmingham, AL 35209 (205) 949-3500 (800) 239-2408 (205) 802-1414 fax 13727 Noel Road th 7 Floor Dallas, TX 75240 (972) 239-4806 (800) 404-2226 (972) 980-7125 fax 12020 Shamrock Plaza Suite 200 Omaha, NE 68154-3537 (402) 778-5054 (402) 778-5135 fax

OTHER LOCATIONS
3475 Lenox Road Suite 800 Atlanta, GA 30326 (404) 365-9630 (404) 812-3097 fax

706 E. Washington Street Greenville, SC 29601 (864) 233-6630 (864) 233-6630 fax

620 Newport Center Dr. Suite 1100 Newport Beach, CA 92660 (949) 721-6651 (949) 721-6652 fax

8400 Normandale Lake Boulevard Suite 920 Bloomington, MN 55437 (952) 841-6410 (800) 949-4102

3100 West End Avenue Suite 930 Nashville, TN 37203 (615) 269-7323 (615) 269-9223

2 Union Street Suite 403 Portland, ME 04101 (207) 699-5800 (207) 699-5888 fax

265 Franklin Street Suite 310 Boston, MA 02110 (617) 478-5000 (800) 836-4616 (617) 443-0310 fax

639 Loyola Ave Suite 200 New Orleans, LA 70113 (504) 299-1021 (888) 978-3763 (504) 299-0956 fax

5609 Patterson Avenue Suite B Richmond, VA 23226 (804) 521-3224 (804) 521-3199 fax

123 N. Wacker Drive Suite 1250 Chicago, IL 60606 (312) 525-8440 (800) 966-0815 (312) 525-8438 fax

2 Grand Central Tower 140 East 45th Street 18th Floor New York, NY 10017 (212) 763-8224 (800) 966-0814 (212) 763-8201 fax

One Maritime Plaza Suite 1940 San Francisco, CA 94111 (415) 362-7430 (415) 362-7436 fax

Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)


				
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