This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Wells Fargo & Company (WFC: chart) on January 16, 2007.

Chief Financial Officer: Howard Atkins
Director, Investor Relations: Bob Strickland

Key Investors Issues

- Earnings per share dropped to 41 cents as against 64 cents in the previous year.
- Quarterly revenue grew 8% over the last year $10.2 billion.
- In 2007, the firm opened 87 banking stores and converted 42 banking stores from acquisitions, bringing the total retail store count to 3,298.

Fourth Quarter Fiscal 2007 Financial Highlights

Net income was $1.36 billion or 41 cents per share compared with $2.18 billion or 64 cents per share, for fourth quarter 2006.

Fourth quarter results included the impact of the $1.4 billion (pre tax) credit reserve build (27 cents per share).

Revenue increased 8% to $10.2 billion, another record, up $792 million from a year ago.

On a linked-quarter basis, revenue growth accelerated to 14% percent (annualized), up $352 million. The strong revenue growth was driven by solid, across the board volume growth in loans, deposits and fee-based products. Many of the firm’s businesses continued to post double-digit, year-over-year revenue growth, including business direct, wealth management, credit and debit card, global remittance services, personal credit management, home mortgage, asset-based lending, asset management, specialized financial services and international.

- Average loans of $374.4 billion in fourth quarter 2007 grew $62.2 billion, or 20% from fourth quarter 2006.
- Average core deposits of $314.8 billion for fourth quarter 2007 increased $31 billion, or 11% from fourth quarter 2006.

Net interest income increased $438 million, or 9% from a year ago and increased $208 million or 16% from third quarter 2007.

This was due to solid earning asset growth (up 16% year-over-year and up 10% on a linked-quarter basis) combined with a 7 basis point expansion in the net interest margin to 4.62% on a linked-quarter basis.

Noninterest income increased $354 million, or 8% from fourth quarter 2006 and increased 12% on a linked-quarter basis.

Noninterest expense increased $489 million, or 9% from fourth quarter 2006 and increased $229 million from third quarter 2007.

Noninterest expense for fourth quarter 2007 included $43 million in integration and severance costs, as well as $33 million in expenses reflecting the company’s proportionate share of Visa’s accrual for certain additional litigation matters.

Total nonperforming assets were $3.87 billion (1.01% of loans) at December 31, 2007.

This included $2.68 billion of nonperforming loans, $535 million of fully insured Government National Mortgage Association (GNMA) repurchases, and $649 million of foreclosed real estate and repossessed vehicles. This compares with $3.18 billion (0.88%) at September 30, 2007, consisting of $2.09 billion of nonperforming loans, $487 million of GNMA repurchases and $603 million of foreclosed and repossessed assets.

The firm’s first mortgage portfolio continued to perform well in the fourth quarter, with annualized charge-offs of only 0.19%.

In other words, only $32 million in fourth quarter losses on the entire $71 billion first mortgage portfolio. The $71 billion of first mortgages that were on balance sheet at December 31, 2007 consisted primarily of $23 billion of debt consolidation loans at Wells Fargo Financial, $12 billion of home equity loans in the first mortgage position, and $36 billion of mostly prime customers, relationship-based first mortgages held at Wells Fargo Home Mortgage, regional banking, and Wealth Management Group. While the firm’s disciplined underwriting standards have resulted in first mortgage delinquencies considerably below industry levels, the firm continued to tighten its underwriting standards in the fourth quarter, including adjusting maximum LTVs based on local market conditions.

At year end, Wells Fargo Financial had $24 billion in U.S.-based real estate secured debt consolidation loans.