Just how big will the new Wells Fargo (WFC)be?
The Fed Commented tonight:
Based on data as of June 30, 2008, which represent the latest adjusted deposit data available from all insured depository institutions, the total amount of deposits of insured depository institutions in the United States was approximately $7.195 trillion. The data indicate that, on June 30, 2008, Wells Fargo controlled deposits
of approximately $298.2 billion, and Wachovia controlled deposits of approximately
$429.6 billion.As of that date, the combined firm would have controlled approximately 10.116 percent of the total amount of deposits of insured depository institutions in the
United States on consummation of the proposal. Wells Fargo and Wachovia provided data on their respective adjusted deposit totals as of September 30, 2008. These data indicate that, on a combined basis, Wells Fargo would control approximately $731.1 billion in deposits on consummation of the proposal.Deposit amounts for other insured depository organizations are not available because institutions are not required to file Call Reports for the third quarter until the end of October, and such data will not be available for review until later in November.
The prohibition in the BHC Act, by its terms, applies if “upon consummation of the acquisition (emphasis added)” the applicant would control more than 10 percent of the total amount of deposits of insured depository institutions in the United States. While the June 30, 2008, deposit data are the most recent data currently available on a uniform basis, the Board believes that other evidence indicates
that the June 30, 2008, data do not reflect the current situation nor would those data accurately reflect the deposit ratio at the time required by the statute, which is the time of consummation of the acquisition.Other data sources indicate, for example, that the total amount of deposits
in the United States has significantly increased since June 30, 2008. Deposit data
collected by the Federal Reserve in its survey of domestically chartered commercial
banks and reported on the Board’s H.8 Release (Assets and Liabilities of Commercial
Banks) for September 2008 indicate that total deposits of insured commercial banks in
the United States increased by approximately 3.9 percent during the third quarter of 2008.Estimated nationwide deposit growth in excess of 3 percent is corroborated by other
deposit data sources. If total deposits reported on June 30, 2008, are adjusted to
account for this level of growth, the combined deposits of Wells Fargo and Wachovia
as of September 30, 2008, would be below 10 percent of nationwide deposits. Indeed,
Wells Fargo’s percentage of total nationwide deposits would be less than 10 percent if adjusted deposits for all insured depository institutions in the United States grew by at least 1.62 percent since June 30, 2008, which would result in a total amount of adjusted deposits all for insured depository institutions of at least $7.311 trillion.Based on all the information available to the Board, the Board concluded that the combined organization would not control an amount of deposits that would exceed the nationwide deposit cap on consummation of the proposal. To ensure compliance with the deposit limits on acquisitions, Wells Fargo has committed that, on consummation, the combined organization would not exceed the nationwide deposit cap based on the data reported by all depository institutions as of September 30, 2008. This commitment includes a commitment that Wells Fargo will reduce its deposits by any amount that exceeds the nationwide deposit cap based on Call Report data as of September 30, 2008, by no later than December 31, 2008.
More followed:
The Board has carefully considered the proposal under the financial factors. The proposed transaction is structured as a share exchange. The subsidiary depository institutions of Wells Fargo and Wachovia are well capitalized and would remain so on consummation of this proposal. Wells Fargo is well capitalized and has announced that it intends to raise additional capital. In light of its capital-raising efforts,
Wells Fargo would remain well capitalized after consummation of this proposal.The Board has also considered the other financial factors noted above in light of information provided by Wells Fargo and Wachovia and supervisory information available to the Federal Reserve through its supervision of these companies and from the primary supervisors of the depository institution subsidiaries of these companies. Based on its review of the record, the Board finds that Wells Fargo has sufficient resources to effect the proposal.
Now, it is just me or does the Fed seem to be making some assumptions on deposits here to make sure Wells Fargo comes in under the 10%? I thought bank’s troubles were that people were taking out money? Wasn’t that what we were told? But according to the Fed, banks are being flooded with cash from depositors.
Here is the number to watch. If “deposits” have grown by less than 1.62% since June, then Wells is over the 10%. Anything more, they squeak under the limit.
Either way, shareholders for Wells ought to sleep better knowing we have such a massive deposit base to work off..
Full release
Disclosure (“none” means no position):Long WFC
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