Wachovia / Wells Fargo Merger Transcript Details

Here are the notable items from the Wells Fargo (WFC), Wachovia (WB) merger call.

– The synergies will be a $5 billion in that number on an annual basis, it’s about 10% of the combined costs of the expenses of the two organizations.
– Merger costs around $10 billion and target the closing for the fourth quarter. The due diligence has all been completed and the remaining approvals we need are regulatory approvals and shareholders’ approvals from Wachovia.
– Will have an industry leading 6,675 banking stores & an industry leading core deposits, or total deposits of just over $700 billion.
– Wachovia Corporation has some $498 billion in loans and the securities portfolios.
The losses are estimated in the asset portfolios of the company which on current estimates total $74 billion. The $74 billion figure is comprised of both credit and rate marks. The bulk of that estimated loss will be taken in the form of purchase accounting adjustments at close. The balance of that $74 will be realized in the form of charge offs over time.
– Combined capital ratios of the organization will be roughly the same to slightly lower at that point than Well Fargo’s capital ratios before the transaction. They are estimating tier one risk based capital at 7.5% compared with 8.2% at the end of June and total capital for the combined organization at the start being 11%, roughly the same as Wells’ standalone capital ratio at the end of June, 2008.

From Q & A
Jason Goldberg – Barclays Capital: “A couple of headlines flowing across I would hope you could react to; the first thing, Citi Believes It Has Exclusive Rights to the Wachovia Branch Operations and secondly, Fed Cautious About Wells Fargo Bid for Wachovia. If you could just talk to conversations with Citi and how that deal was structured with respect to this transaction? Why you think believe this deal supersedes that and any rights Citi may have, any breakup fees, etc.? And secondly, any comments you’ve had with the regulators with respect to this transaction?”

Richard M. Kovacevich: “We think that this deal is solid. We’re not aware of any merger agreements that had been consummated at the time. And as far as other issues, I haven’t seen anything in terms of issues that Citi has or doesn’t have. We feel very confident that this transaction has been done appropriately and we’ll continue and be consummated and we’ll go forward with it.”

This is a brilliant move by Wells. They get a quality bank (unlike Washington Mutual (WM) or Bear Stern (LEH), acquired by JP Morgan (JPM)) and vastly expand their presence throughout the US. The $5 billion in cost savings essentially mean a cost of $10 billion for the bank $4.62, dirt cheap..

Full transcript

Disclosure (“none” means no position):Long WFC
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