Wells Fargo (WFC, NYSE) is the fourth-largest bank in the U.S., with over 10,000 branches and $1.2 trillion in assets. The company almost doubled its size by acquiring failing Wachovia at the end of 2008. Although WFC had to write down the value of billions in Wachovia loans, the acquisition gave the firm a truly national footprint. WFC now has a deposit base of $759 billion, important since deposits are the lowest-cost money available to banks. The integration of Wachovia is on track and management expects $5 billion per year in savings from the purchase. However, WFC will incur about $2 billion in merger-related costs in 2010. Wells Fargo is known for a strong management team and industry-beating financial metrics. Today’s challenging environment means loan losses will likely remain high until the economy strengthens. [However,] losses appear to be stabilizing and the firm’s capital position has improved. Despite the hurdles it faces, WFC will likely benefit over the long term from the disappearance or serious weakening of many competitors. Buy Below $25.
Peter Hughes & Steven Check, The Blue Chip Investor