NEW YORK Jan 1 Wells Fargo & Co (WFC.N) said
it has completed its roughly $12.7 billion purchase of Wachovia
Corp, a big bet that it properly assessed the risks in
Wachovia's huge book of mortgage and real estate loans.
The merger closed on Wednesday and more than doubles the
size of Wells Fargo, creating the fourth-largest U.S. bank by
assets. Wells Fargo also has the nation's largest branch
network, with more than 6,600 offices in 39 states and
Washington, D.C., and one of its largest retail brokerages.
San Francisco-based Wells Fargo agreed on Oct. 3 to buy
Wachovia, beating out a smaller bid by Citigroup Inc (C.N) for
part of Wachovia. Citigroup's bid included government backing,
while Wells Fargo's did not. Wells Fargo said Wachovia branches
will keep their brand name at least for the "near future."
Regulators pushed Wachovia to find a buyer after the
Charlotte, North Carolina, bank was throttled by soaring losses
on "option" adjustable-rate mortgages it took on when it bought
California lender Golden West Financial Corp in 2006.
Last month, Wells Fargo said it expects to write down $71.4
billion of Wachovia's $482.4 billion loan portfolio, including
$36 billion of option ARMs and $9.6 billion of commercial real
Analysts have said Wells Fargo appeared cautious in
assessing risks in Wachovia's mortgage portfolio, but the U.S.
economy and housing market have continued to deteriorate.
"We're not at the end" of the housing slump, Wells Fargo
Chief Executive John Stumpf said on Dec. 10 at a conference.
"But we're starting to see some early signs that maybe we've
reached the bottom in housing or close to it."
Wells Fargo is the nation's second-largest mortgage lender.
It remained profitable by avoiding many of the risky loans that
plagued Wachovia, caused Washington Mutual Inc's WAMUQ.PK and
IndyMac Bancorp Inc's IDMCQ.PK failures and drove Countrywide
Financial Corp into the arms of Bank of America Corp (BAC.N).
Wachovia shareholders received 0.1991 of a Wells Fargo
share for each of their shares, valuing the bank at $5.87 per
share. That's down from $59.39 when the Golden West merger was
announced in May 2006, a level never again reached. Wachovia
shares closed Wednesday at $5.54, down 85.4 percent in 2008.
Shares of Wells Fargo closed Wednesday at $29.48, down just
2.4 percent for the year. The KBW Bank Index .BKX, which
includes Wells Fargo, fell 50 percent in 2008.
Wells Fargo expects the merger to result in at least $5
billion of annual cost savings, and to boost earnings per share
by 20 percent or more in 2011 and higher amounts thereafter.
Including Wachovia, Wells Fargo has about $1.4 trillion of
assets. Bank of America is expected Thursday to complete its
purchase of Merrill Lynch & Co, creating the nation's largest
bank by assets. JPMorgan Chase & Co (JPM.N) and Citigroup also
have more assets than Wells Fargo.
(Reporting by Jonathan Stempel; Editing by Eric Beech)