MOODY'S UPGRADES WELLS FARGO BANK N.A. TO Aaa; PARENT WELLS FARGO & COMPANY SENIOR DEBT RATINGS GO TO Aa1
Approximately $55 Billion of Debt Securities Affected.
New York, September 25, 2003 -- Moody's Investors Service today raised the long-term credit ratings
of Wells Fargo & Company (senior debt to Aa1 from Aa2) and its bank
subsidiaries including lead bank Wells Fargo Bank N.A. (deposits
to Aaa from Aa1). The rating agency said that the upgrade reflects
the company's strong retail and middle-market banking franchise,
its good earnings diversification by product and geography, as well
as its consistently robust core earnings, solid risk management,
and highly focused sales culture. Moody's believes that these attributes
should lead to the continuation of a stable and predictable earnings and
risk profile. The upgrade also reflects the recent steps taken
to strengthen financial management and controls, bolster parent
company liquidity and reduce double leverage, as well as company's
good corporate governance.
Wells Fargo is the fourth largest banking company in the U.S.
by assets, and the second largest in domestic core deposits.
Its business franchise is characterized by a top three market share in
deposits in 17 western states that in aggregate account for 96%
of the company's total deposits. This sizable deposit franchise
is complemented by market leading national positions in residential mortgage
lending, commercial real estate lending, lending to small
businesses, and home equity loans. Wells Fargo also owns
the fifth largest insurance broker in the U.S. and is the
fourth largest middle market lender.
Moody's said that Wells Fargo's profile and portfolio of businesses
combined with disciplined management has produced consistent high margins
and growth. Wells Fargo's performance is consistently strong
in comparison to peers, characterized by a wide net interest margin,
strong pre-provision earnings, and consistent core deposit
growth. In addition, the bank's highly granular credit
exposures, conservative credit culture, and strong management
focus on risk-adjusted returns limit the volatility of its credit
Moody's noted that during an extended period of very low interest
rates the earnings Wells Fargo's realizes from its strong core deposit
business would likely be diminished. However, while this
would lead to a contraction of net interest margins, the rating
agency believes that Wells Fargo's strong customer focus and leading
mortgage banking franchise should help to generate offsetting earnings
and sustain ample credit protection for bondholders.
The rating agency said that the company's venture capital activities
are a potential source of greater earnings volatility than its other business
lines. Moody's does not consider this business to be strategically
core for Wells Fargo. Nevertheless, the business is small
relative to consolidated equity and total earnings, its accounting
is conservative, and management has adopted hedging strategies which
should help limit future earnings volatility. Moody's does
not expect this business to grow further relative to consolidated equity
or earnings. The rating agency stated that given the relatively
small size of the venture capital activities, the risks posed to
Wells Fargo's creditors from the potential losses in this business
are sufficiently offset by the consolidated company's consistently
strong core earnings so as to be negligible.
The following ratings were upgraded:
Wells Fargo & Company -- the senior long-term debt rating
to Aa1 from Aa2, the issuer rating to Aa1 from Aa2, the subordinated
debt rating to Aa2 from Aa3, and the preferred stock rating to Aa3
WFC Holdings Corporation -- the subordinated debt rating
to Aa2 from Aa3, and the preferred stock rating to Aa3 from A1.
Wells Fargo Financial, Inc. -- the senior long-term
debt rating to Aa1 from Aa2, the issuer rating to Aa1 from Aa2,
and the subordinated debt rating to Aa2 from Aa3.
Wells Fargo Financial Canada Corporation -- the senior long-term
debt rating to Aa1 from Aa2.
Wells Fargo Capital A, B, C, I, II, III,
IV, V, VI, VII, VIII, and IX -- the
rating for trust preferred securities to Aa2 from Aa3.
First Security Capital I -- the rating for trust preferred
securities to Aa2 from Aa3.
Wells Fargo Bank, N.A., -- the
rating on the bank for long-term deposits and other senior obligations
to Aaa from Aa1, the issuer rating to Aaa from Aa1, and the
subordinated debt rating to Aa1 from Aa2.
Wells Fargo Bank Minnesota, N.A., Wells Fargo
Bank Texas N.A., Wells Fargo Bank Iowa, N.A.,
Wells Fargo Bank Nebraska, N.A., Wells Fargo
Bank New Mexico, N.A., Wells Fargo Bank South
Dakota, N.A., Wells Fargo Bank West, N.A.,
Wells Fargo Bank Northwest, N.A. -- the rating
on the bank for long-term deposits and other senior obligations
to Aaa from Aa1 and the issuer rating to Aaa from Aa1.
Moody's also affirmed the Prime-1 commercial paper ratings for
Wells Fargo & Company and Wells Fargo Financial Canada Corporation,
and the Prime-1 short-term deposit ratings and A financial
strength ratings for all of Wells Fargo's rated bank subsidiaries.
Wells Fargo & Company, headquartered in San Francisco,
California, is the fourth largest banking company in the United
States, with assets of $370 billion at June 30, 2003.
Gregory W. Bauer
Financial Institutions Group
Moody's Investors Service
Senior Vice President
Financial Institutions Group
Moody's Investors Service