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David Carroll Senior Executive Vice President Head of Wealth, Brokerage and Retirement
February 9, 2011
2011 Wells Fargo & Company. All rights reserved.
We want to satisfy all our customers financial needs, help them succeed financially, be the premier provider of financial services in every one of our markets, and be known as one of Americas great companies America s companies.
Overview
Leading franchise Wells Fargo 4Q10 results Wealth, Brokerage and Retirement Business (WBR) overview
Wells Fargo serves consumers and businesses in more communities than any other U.S. Bank
70 MM+ customers 9,000 stores 12,000 ATMs 57,000 , salespeople 18MM online banking customers
Wells Fargo Bank stores Wachovia Bank stores Wells Fargo Advisors offices Wells Fargo Home Mortgage stores
As of 4Q10.
Key Business Segments: Community Banking Over 6,300 retail banking stores and 12,000 ATMs
- No 2 U.S. Deposit market share No. U S
(2)
No. 1 Small business banking (SBA lender) No. 1 Mortgage originator (4)
- No. 2 Mortgage servicing portfolio
(3)
25% 62%
Wholesale Banking No. 1 Commercial real estate lender (5) No. 1 Insurance Brokerage (bank-owned) (6) No. 2 Asset management (bank-owned) (7) No. 3 Commercial loan syndications (8) No. 5 U.S. equity underwriting (9) Wealth, Brokerage and Retirement (WBR) 15,188 15 188 financial advisors
- No. 3 Brokerage Client Assets (10); $1.2 trillion
(1)
in 4Q10
NIAT up 21% YoY, 9% linked quarter annualized (LQA) $0.61 $0 61 earnings per share in 4Q10
3.3 3.4
4Q09
1Q10
2Q10
3Q10
4Q10
Revenue
22.7
21.4 21.4
20.9
60% of revenue in 4Q10 came from businesses with > 10% LQA growth Revenue growth across the franchise in 4Q10: - Period end loans up 2% LQA, up 6% LQA excluding $6.0 billion reduction in nonstrategic loans (1) - Mortgage originations up 27% - Accelerating checking/savings deposits up 17% annualized
- Wealth, Brokerage and Retirement client assets up 12% annualized - Trust and investment fees up 15% 4Q10 expenses included: - $533 million in Wachovia integration costs - $827 million in loan resolution/loss mitigation costs - $400 million charitable contribution to Wells Fargo Foundation - Seasonally higher advertising, travel, equipment and software expense i t d ft
Noninterest Expense
($ in billions)
12.7 12.8 13.3 12.1 12.3
4Q09
1Q10
2Q10
3Q10
4Q10
Percent changes from 3Q10. (1) The non-strategic / liquidating loan portfolio includes the Pick-a-Pay, liquidating home equity, legacy WFF indirect auto, legacy WFF debt consolidation and Commercial and Commercial PCI loan portfolios.
$3.8 billion net charge-offs in 4Q10, down 29% from 4Q09 peak Provision expense of $3.0 billion, down $456 million from 3Q10 ($ Q ($256 million fewer losses and $200 million higher reserve release) $2.1 billion decline in NPLs from 3Q10 Allowance for credit losses = $23.5 billion = 6.11x quarterly charge-offs Remaining PCI nonaccretable at 12/31/10 = 29.5% of remaining UPB (1)
5.41
5.33
4.49
4.10
3.84
4Q09
1Q10
2Q10
3Q10
4Q10
Net Charge-offs
Reserve Release
Nonperforming Assets
($ in billions)
27.6
3.2
31.5
4.2
32.9
5.1
34.6
6.3
32.4
6.2
24.4
27.3
27.8
28.3
26.2
4Q09
1Q10
2Q10
3Q10
4Q10
Nonperforming loans
REO/Foreclosed assets/Other
(1) Unpaid principal balance for PCI loans that have not had a UPB charge-off. Wells Fargos charge-offs in part reflect reduced risk in the Wachovia portfolio due to PCI accounting performed for highest risk Wachovia loans.
Other O h capital ratios growing i l i i Tier 1 Capital = 11.25% Tier 1 Leverage = 9.19%
(1)
7.61% 7.09%
Tier 1 common under Basel II/III = 6.9% at 12/31/10 Objective: increase dividend, repurchase shares, redeem callable TRUPS (2)
3.12% 3 12%
See the appendix for more information on Tier 1 common equity. 4Q10 capital ratios are preliminary estimates. (1) Pro forma calculations based on reported Tier 1 common equity, as adjusted to reflect managements interpretation of current Basel III capital proposals. These pro forma calculations and managements estimates are subject to change depending on final promulgation of Basel III capital rulemaking and interpretations thereof by regulatory authorities. (2) Subject to regulatory approval and, with respect to the TRUPS, the satisfaction of any other applicable conditions.
WBR overview
Wealth, Brokerage and Retirement provides a fullarange of financial advisory, Wealth, Brokerage and Retirement provides full range of financial lending, fiduciary, and investment management services advisory, lending, fiduciary, and investment management services to clients using a planning approach tailored to meetmeet each clients needs to clients using a planning approach tailored to each clients needs Wealth Management Provides affluent and high net worth clients with a complete range of wealth management solutions including financial planning, private banking, credit, investment management and trust. Family Wealth delivers a complete and distinct experience focused on the wealth needs of ultra affluent families. lh d f l ffl f l Brokerage Financial advisors primarily serve affluent and high net worth clients advisory, brokerage and financial needs, through multiple channels, as part of one of the largest full-service brokerage firms in the U.S. Retirement Provides retirement services for individual investors and is a national leader in 401(k) and pension record keeping
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WBR framework
Mission: To help our clients achieve financial peace of mind
Build enduring client relationships on a foundation of sound, thoughtful and objective advice Develop individualized financial plans to help meet clients financial objectives Help our clients build, manage, preserve and transition their financial resources and wealth
Vision: To be the premier provider of planning, advice, solutions and services in every one of our markets
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Brokerage
Wealth Management
5th Largest U.S.-based Multifamily Office with $23B in Assets Under Advisement and an average relationship size of $71MM (2) $198B in Assets Under Care
(3)
Retirement R ti t
2nd Largest Annuity Distributor (4) 5th Largest IRA provider (5) with $266B IRA Assets 6th Largest Institutional Retirement Plan Recordkeeper b l l dk based on assets d $231B Institutional Retirement Plan Assets $285B Custody Assets 7th Largest Retail Deposit base in the U.S.
(6)
with h
WBR Deposits
Attractive, stable funding source for the company with weighted average cost of 0.16%
Assets based on company data and peer analysis, as of December 31, 2010 unless otherwise noted. (1) Barrons 2010 Survey; Based on Assets Under Management in accounts > $5MM (as of June 30, 2010). Includes Brokerage Client Assets and Wealth Assets Under M U d Management. t (2) Family Wealth Alliance Multifamily Office Study 2010; Company figures reflect year end 2009. (3) Includes $48 billion in deposits as of December 31, 2010. (4) Sun Life Distributor Roundtable Survey (based on sales), May 2010. (5) Cerulli Associates (based on 1Q10 assets), September 2010. (6) PLANSPONSOR Magazine (based on 4Q09 defined contribution assets), July 2010.
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Mass
Investable Assets: $ $3.8T Liabilities: $7.9T
Affluent
Investable Assets: $13.0T Liabilities: $2 9T Li biliti $2.9T
Direct Financial Wells Fargo Solutions (DFS) Advisors Multi-Channel Delivery Model
WellsTrade
Data as of June 2008; source: Booz & Company analysis; Federal Reserve data.
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Family Wealth
Family Office Client
How it works
Community Bank Wealth Brokerage Services
40%
50%
IMT
30%
WBS
Family Wealth
Measure of Success
# of Families
Benefits
Growing Balances B l
Increasing Cross-sell C ll
Improving Retention R t ti
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Significant opportunities to capitalize on Moneyin Motion in-Motion and cross-sell cross sell services with affluent Wells Fargo Bank clients
thats consolidating
Growth in need for Total Financial Management (i.e., Assets and Liabilities)
Winners are firms with the depth and breadth to offer the client a unified experience
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The retiree wave is here and they want and need help
The number of retirees is expected to grow
Estimated Number of US Retirees 51 50 49 48
M Millions
People nearing retirement need help People in their 60 s have mixed feelings 60s about their upcoming retirement
- 46% are excited about the opportunity - 31% are nervous about having enough
y money
47 46 45 44 43 42 2011 2012
14.8%
A sizable number still do not have a written plan showing how much and when they can withdraw savings in retirement ti t - 41% of people in their 50s have a plan - 46% of people in their 60s have a plan 64% of affluent investors in their 60s would value a formal retirement plan
2013
15.1%
2014
15.4%
2015
15.6%
% of US population 14.5%
Source: Wells Fargo, Retirement Survey, 2010 Harris Interactive telephone survey of approximately 1,800 middle class Americans; LIMRA Fact Book on Retirement Income 2010.
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Business Planning Client Segmentation Client Service Matrix How to RUN my business
How to GROW new relationships R f Referral Process lP Maximize Existing Client Relationship
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Client Re eviews
Investments REVIEW
UNDER RSTAND
Risk Management g
IMPLEMENT Advice
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86% of FAs have done an Envision plan on at least one of their clients Annual Lending Sales
($ in billions)
(2)
Client With A Plan 83% Score As Loyal Best Practice Clients 88% Score as Loyal
$ $7.2
52% Score as Loyal Non Best Practice Clients 47% Score as Loyal
$1.9
2004
2010
Best Practice clients are those who have a plan, an advisory relationship, and regular FA contact
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Evolve
Monitor progress
Implement allocation
Prioritize goals
Advise
Recommendation
In balance targeted confidence
Analyze
Stress test goals
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300,000
Over the last two years, the number of Key HHs with an Envision Plan has increased from ~160k to ~420k or approximately 71% of all planning eligible Key households Financial Advisor adopters (defined as FAs who have completed more than 25 Envision Plans) have increased significantly from ~3,800 to ~7,100 over the last two years Envision has helped identify more than $90 billion of client assets held away from the company
(1) Key HHs defined as those with $250,000 of assets with the firm.
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Cross-sell
WBR cross-sell opportunity Deepening relationships - 11% of retail bank households overlap with WBR Significant opportunity to further penetrate retail households with brokerage and retirement products i d Total Enterprise Households 40.2 MM Retail 22.1 22 1 MM HH
Non-Retail 18.1 MM HH
WBR
Retail Bank Overlap 2.6 MM HH Non-Bank Non Bank 2.5 MM HH
9.80 Cross-sell
5.1MM 5 1MM HH
HH = Household. Data as of December 31, 2010. WBR households are total combined households excluding Institutional Retirement participants. Cross-sell represents the number of products owned by WF household.
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HH Balances increase 6X 5.2MM WFC banking HHs (1) currently dont hold investment products $1.7 trillion investable assets
We deepen our relationships with affluent households by cross-selling products across lines of businesses
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1.94%
0.34%
2010 Average
Impact of 50 basis points (bps) increase in Avg. 3 month LIBOR on 2010 results: Avg Earnings up 18% over reported results Pretax margin up 200 bps Additional 270 bps of operating leverage
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$10.8
Noninterest Expense
($ in billions)
70%
$9.8 $9.4
$529
14%
2009
2010
2009
2010
Pre-Tax Margin
Recurring Revenue
25
Operating Leverage
5.3% 5 3%
1.1%
Ex-Intangible Amortization
Client Assets
($ in trillions)
$1.5 $1.4 $1.3
70% 65%
2009
2010
3 Yr Target
2009
(1)
2010
(1)
3 Yr Target
(1) Includes $50 billion and $46 billion of Wealth deposits for 2009 and 2010, respectively, previously not included.
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Summary
Leading franchise Strong, consistent and high-quality earnings 4Q10 results driven by broad-based revenue growth, significant improvement in credit quality and loan growth Strong capital position Wealth, Brokerage and Retirement is well-positioned to capitalize on growth opportunities
- Leading provider across wealth, brokerage, retirement and retail deposit segments, fueled
by strong demographic and economic tailwind - Advice-based planning to achieve clients financial peace of mind - Deepen and enhance Wells Fargo customer relationships and add new customers - Strong growth segment for the company
Recurring revenue streams Optimizing advisor performance Institutionalizing a planning culture Proven internal partnerships p p Interest rate opportunity
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Appendix
28
Investment I Managers
Trust Officers
Financial Advisors
Insurance Specialists
Affluent
Mass Market M k t
Platform Bankers
Licensed Bankers
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2011
Feb - Dec
2012
DC Conversion (4 of 4)
CO
NV, AZ, IL
CA
GA
NJ, NY
30
$3.0
$0.2
(1)
$2.7
Other 8% Retirement Private Banking & ki Trust Asset-Based / Other Recurring Fees 47%
$0.2 $0.5 $0 5
WBS WBS IBG
DFS/ WellsTrade DFS/ WellsTrade
$0.6
IBG
$2.3
4Q09
(1) Does not foot due to rounding.
4Q10
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, Dec. 31, 2010 $ 127.9 (1.5) 126.4 (8.1) (35.5) 4.3 (0.9) (4.6) (0.3) 81.3 8.37 %
Sept. 30, p , 2010 125.2 (1.5) 123.7 (8.1) (36.1) (36 1) 4.7 (0.9) (5.4) (0.3) 77.6 968.4 8.01
June 30, , 2010 121.4 (1.6) 119.8 (8.1) (36.7) (36 7) 5.0 (1.0) (4.8) (0.3) 73.9 970.8 7.61
Mar. 31, , 2010 118.1 (2.0) 116.1 (8.1) (37.2) (37 2) 5.2 (1.5) (4.0) (0.3) 70.2 990.1 7.09
Dec. 31, , 2009 114.4 (2.6) 111.8 (8.1) (37.7) (37 7) 5.3 (1.0) (1.6) (3.0) (0.2) 65.5 1,013.6 6.46
Sept. 30, p , 2009 128.9 (6.8) 122.1 (31.1) (37.5) (37 5) 5.3 (1.5) (4.0) (0.3) 53.0 1,023.8 5.18
June 30, , 2009 121.4 (6.8) 114.6 (31.0) (38.7) (38 7) 5.5 (2.0) (1.6) 0.6 (0.3) 47.1 1,047.7 4.49
Mar. 31, , 2009 107.1 (6.8) 100.3 (30.9) (38.6) (38 6) 5.7 (4.7) (1.2) 3.6 (0.8) 33.4 1,071.5 3.12
(B) (A)/(B)
$ 971.7
(1) T ier 1 common equity is a non-generally accepted accounting principle (GAAP) financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. T ier 1 common equity includes total Wells Fargo stockholders' equity, less preferred equity, goodwill and intangible assets (excluding MSRs), net of related deferred taxes, adjusted for specified T ier 1 regulatory capital limitations covering deferred taxes, MSRs, and cumulative other comprehensive income. Management reviews T ier 1 common equity along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market non GAAP information equity participants. (2) Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor or, if relevant, the guarantor or the nature of any collateral. T he aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. T he resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets. T he Company's December 31, 2010, preliminary risk-weighted assets reflect estimated onbalance sheet risk-weighted assets of $814.4 billion and derivative and off-balance sheet risk-weighted assets of $157.3 billion.
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