Wells Fargo 2012 Annual Report Download - page 32

This Annual Report, including the Financial Review and the Financial Statements and related Notes, contains forward-looking
statements, which may include forecasts of our financial results and condition, expectations for our operations and business, and our
assumptions for those forecasts and expectations. Do not unduly rely on forward-looking statements. Actual results may differ
materially from our forward-looking statements due to several factors. Factors that could cause our actual results to differ materially
from our forward-looking statements are described in this Report, including in the “Forward-Looking Statements” and “Risk Factors”
sections in this Report, and in the “Regulation and Supervision” section of our Annual Report on Form 10-K for the year ended
December 31, 2012 (2012 Form 10-K).
When we refer to “Wells Fargo,” “the Company,” “we,” “our” or “us” in this Report, we mean Wells Fargo & Company and Subsidiaries
(consolidated). When we refer to the “Parent,” we mean Wells Fargo & Company. When we refer to “legacy Wells Fargo,” we mean
Wells Fargo excluding Wachovia Corporation (Wachovia). See the Glossary of Acronyms at the end of this Report for terms used
throughout this Report.
Financial Review
Overview
Wells Fargo & Company is a nationwide, diversified,
community-based financial services company with $1.4 trillion
in assets. Founded in 1852 and headquartered in San Francisco,
we provide banking, insurance, investments, mortgage, and
consumer and commercial finance through more than
9,000 stores, 12,000 ATMs and the Internet (wellsfargo.com),
and we have offices in more than 35 countries to support our
customers who conduct business in the global economy. With
more than 265,000 active, full-time equivalent team members,
we serve one in three households in the United States and
ranked No. 26 on Fortune’s 2012 rankings of America’s largest
corporations. We ranked fourth in assets and first in the market
value of our common stock among all U.S. banks at December
31, 2012.
Our vision is to satisfy all our customers’ financial needs,
help them succeed financially, be recognized as the premier
financial services company in our markets and be one of
America’s great companies. Our primary strategy to achieve this
vision is to increase the number of our products our customers
utilize and to offer them all of the financial products that fulfill
their needs. Our cross-sell strategy, diversified business model
and the breadth of our geographic reach facilitate growth in both
strong and weak economic cycles, as we can grow by expanding
the number of products our current customers have with us, gain
new customers in our extended markets, and increase market
share in many businesses.
Financial Performance
We generated strong financial results in 2012 even with
regulatory changes and an uncertain economic and political
environment. We had higher net income and revenue, solid loan
and deposit growth, an improved efficiency ratio and improved
credit quality in 2012 compared with 2011. Our 2012 results
reflected our resolution of mortgage origination, servicing, and
foreclosure matters with various regulators and government
entities; Super Storm Sandy, which impacted many of our
customers in the northeast; and new regulatory guidance that
affected our credit metrics. Our return on average assets of 1.41%
was up 16 basis points from 2011, the highest it has been in five
years, and our return on equity increased to 12.95%, up 102 basis
points from 11.93% for 2011.
Wells Fargo net income was $18.9 billion and our diluted
earnings per common share was $3.36 for 2012, each up 19%
from 2011. Our earnings per share have grown for 12 consecutive
quarters through the end of 2012. The increase in our net income
for 2012 over 2011 was driven by a 6% increase in total revenue
and the benefit of improving our efficiency ratio to 58.5% from
61.0% in 2011.
Our total revenue increased to $86.1 billion in 2012, up
$5.1 billion, or 6%, from 2011. The 6% revenue increase
predominantly reflected the diversity of our business model and
included:
x $3.8 billion increase in mortgage banking income as
discussed below;
x $693 million increase in net gains from trading activities, a
major portion resulting from customer accommodations;
and
x $586 million increase in trust and investment fee income
due to growth in assets under management reflecting higher
market values and net asset inflows as well as transaction
activity on volume-driven fees.
Mortgage banking income increased due to higher net gains
on higher mortgage loan origination/sales activities reflecting
increased margins and a lower interest rate environment for
2012 compared with 2011. Our mortgage loan originations in
2012 totaled $524 billion (of which we retained $19.4 billion in
conforming loans on balance sheet), compared with $357 billion
in 2011. Our unclosed mortgage loan pipeline was $81 billion at
December 31, 2012, up 13% from $72 billion at the end of 2011.
Noninterest expense totaled $50.4 billion in 2012, up from
$49.4 billion in 2011. The increase from 2011 reflected elevated
operating losses and other costs due to mortgage servicing
regulatory consent orders, a $175 million settlement with the
Department of Justice that resolved claims related to mortgage
lending practices, a $766 million accrual for the Independent
Foreclosure Review (IFR) settlement and other remediation-
related costs, and a $250 million contribution to the Wells Fargo
Foundation. In addition, our expenses in 2012 were also driven
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