Monday, February 9, 2009
Wachovia drag has some wondering if all's well at Wells
Weighed down by its prize acquisition, the bank some consider the best-run in the country may have to cut its dividend—or re-tap the TARP
By Ronald Fink
February 9, 2009 12:01 AM ET
Big wheels: John Stumpf (left), CEO of Wells Fargo, and Robert Steele, onetime head of Wachovia, unveiling the deal back in October. (Bloomberg) The wheels, it would seem, are starting to come off the Wells Fargo wagon.
Considered by many analysts to be the best-run big bank in the U.S., Wells nonetheless reported a larger than expected loss in the quarter ended Dec. 31. Now some analysts predict the bank's management, headed by CEO John Stumpf, will either have to cut Wells' dividend or raise more capital, perhaps by hitting up the U.S. Treasury again.
Either move would not likely go down well with shareholders.
Wells reported a loss of $2.8 billion for the quarter, or 79 cents a share, more than twice what some analysts were predicting. Most of the red ink flowed from the bank’s acquisition of loss-laden Wachovia last year.
Wells raised $13 billion of equity in November after accepting $25 billion in federal funds under the Troubled Asset Relief Program the month before. But the bank reported only $86 billion, or 7.88% of assets, in so-called Tier 1 regulatory capital at the end of the year.
That’s well below management’s goal of $100 billion (or 8%)—a target it claimed in November it would hit.