Wachovia Bank Deposit Credit Time

Fitch Affirms Wells Fargo & Company; Outlook Stable.

CHICAGO —
Fitch Ratings

An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris.
 has affirmed
Wells Fargo

 & Co’s
(
WFC

WFC Wide-Field Camera
WFC World Financial Center
WFC Workforce Center
WFC World Federation of Chiropractic
WFC World Food Council
) ratings, including its long- and short-term Issuer Default Ratings
(IDRs) at ‘AA-‘ and ‘F1+’, respectively. The Rating
Outlook for WFC remains Stable. A list of affected ratings follows the
end of this release.

The affirmation of WFC’s ratings at their current high levels
reflects solid profitability levels, sound capital profile, and good
liquidity position. These strengths are offset by a growing
concentration to the residential mortgage market and weaker than average
asset quality ratios. With a long-term
IDR

 of ‘AA-‘, WFC is
among the highest rated banks in the U.S., mainly supported by its
earnings profile and capital generation capabilities.

WFC remains one of the strongest earners in the U.S. large bank
universe, and the company continues to post record net income, with an
improving core earnings trend over the past five quarters. WFC once
again reported record net income of $4.6 billion in 2Q12, a 9% increase
from the sequential quarter. Much of WFC’s strong earnings stem
from its low-cost funding base and diversified sources of noninterest
income. Incorporated in Fitch’s recent rating action is the
expectation that once environmental costs
normalize

 and the interest
rate environment improves, WFC will reach the high end of its long-term
ROA target of between 1.3% to 1.6%, a level of earnings commensurate
with the company’s ratings.

WFC’s liquidity profile remains solid. The company is primarily
deposit funded, with core deposits representing approximately 80% of
total funding sources. WFC also actively uses wholesale funding sources
as well, including
FHLB

 borrowings and short- and long-term debt. Debt
maturities are well distributed, and significant liquidity is held in
the form of cash and
liquid assets

 at both the parent company and the
banks. Further, there is a limited reliance on short-term
borrowings.

Fitch believes that WFC is appropriately capitalized, particularly
given its solid funding and earnings profiles, to manage through
continued economic challenges ahead. WFC’s Tier I common ratio at
June 30, 2012 was an estimated 10.08%, up nearly 100bps from June 30,
2011, driven primarily by
retained earnings

 growth. The company’s
estimated Tier I common ratio under Basel III capital proposals was an
estimated 7.78% at June 30, 2012. Higher risk-weighted assets drives
most of the decline under Basel III, partially offset by the inclusion
of cumulative other comprehensive income.

Given WFC’s #1 market share in origination and servicing, as
well its large portfolio of first and
second lien

 mortgages and
mortgage-backed securities, WFC is concentrated to the residential real
estate housing market. Much of the increased exposure to residential
lending is reflective of the strong mortgage market and
retrenchment

n.
The cutting away of superfluous tissue.
 of
key competitors over the past year. Nonetheless, this concentration is
considered a rating sensitive factor, though there are no direct rating
implications at this time. Fitch expects this concentration to moderate
over time as the current refinancing boom slows, and WFC grows other
consumer loan books, as well as its commercial portfolio.

WFC’s
MSR

MSR Mountain Safety Research
MSR Magnetic Stripe Reader
MSR Egyptair  
 asset has meaningful capital implications under Basel
III. As of March 31, 2012, WFC was not over the threshold for MSRs under
Basel III; however, when rates rise, the value of MSRs should
presumably
  
adj.
That can be presumed or taken for granted; reasonable as a supposition:
 rise given the expectation of lower prepayment speeds. As MSR increase
in value, deductions to capital ratios will take effect, and adversely
impact capital ratios. Fitch already deducts 100% of MSRs in its
calculations of Fitch Core Capital. WFC is considering potential
strategies for dealing with the MSR cap under Basel III, including
servicing sales and de-emphasizing third party lending channels. As a
result of the different treatment of MSRs and the inclusion of other
comprehensive income under Basel III, Fitch expects WFC to maintain an
appropriate capital buffer to withstand the related volatility in
capital ratios.

WFC’s credit risk metrics have improved alongside the industry,
but NPA ratios remain elevated and above regional bank peer averages.
NPAs,
inclusive of

prep.
Taking into consideration or account; including.
 accruing troubled debt restructurings (TDRs) totaled
5.51% of loans and foreclosed real estate at March 31, 2012, as compared
to an average of approximately 3.4% for the rest of the regional bank
peers. Accruing TDRs as of June 30, 2012, which are significant for WFC
and added approximately 200bps to the Fitch calculated NPA ratio last
quarter, were not available at time of publication.

Much of the weaker relative performance in NPAs is due to a large
balance of mortgage-related accruing TDRs and below average credit
quality on the residential mortgage loan book. Positively, reported NPAs
(excluding accruing TDRs) in 2Q12 were down 6.6% on a sequential basis.
Despite WFC’s credit quality, Fitch views WFC’s strong
earnings capacity as an adequate risk mitigant. As an example,
WFC’s quarterly pre-provision net revenues have averaged around $8
billion over the past five quarters, around 3x coverage of quarterly net
charge-offs. NCOs fell to 1.15% in 2Q12, closing in on WFC’s
long-term target of 1%.

Ratings Sensitivity

Given WFC’s ratings at already at the top of the U.S. rated
universe, Fitch views limited potential for a ratings upgrade. However,
WFC’s ratings might be reviewed if the capital implications related
to the MSR asset become outsized relative to peers under Basel III.
Further, failure to lessen the mortgage concentration could pressure
WFC’s ratings over time. Large scale reforms in the mortgage
industry would also likely prompt a review of WFC’s ratings.

In addition, failure to maintain earnings at current levels would
likely pressure WFC’s ratings. Much of the rating support for
maintaining WFC at their current levels is premised on WFC’s strong
core earnings profile. It is the strength of the earnings stream that
provides for solid capital generation capabilities, which will help to
absorb unexpected losses.

Headquartered in San Francisco, Wells Fargo & Company (WFC) is
the fourth largest bank in the U.S. with $1.3 trillion in total assets
and $149 billion in equity.

Fitch has affirmed the following ratings:

Wells Fargo & Co.

–Long-term IDR at ‘AA-‘;

–Senior debt at ‘AA-‘;

–Subordinated debt at ‘A+’;

–Preferred stock at ‘BBB’;

–Short-term IDR at ‘F1+’;

–Commercial paper at ‘F1+’;

–Short-term debt at ‘F1+’;

–Market-linked securities at ‘AA- EMR’;

–Viability at ‘aa-‘;

–Support at ‘1’;

–Support floor at ‘A’.

Wells Fargo Bank, NA

–Long-term IDR at ‘AA-‘;

–Long-term deposits at ‘AA’;

–Market-linked securities at ‘AA EMR’;

–Senior debt at ‘AA-‘;

–Subordinated debt at ‘A+’;

–Short-term IDR at ‘F1+’;

–Short-term deposits at ‘F1+’;

–Short-term debt at ‘F1+’;

–Viability at ‘aa-‘.

–Support at ‘1’;

–Support Floor at ‘A’.

Wells Fargo Bank Northwest, NA

–Long-term IDR at ‘AA-‘;

–Long-term deposits at ‘AA’;

–Senior debt at ‘AA-‘;

–Short-term IDR at ‘F1+’;

–Short-term deposits at ‘F1+’;

–Viability at ‘aa-‘;

–Support at ‘1’;

–Support Floor at ‘A’.

Wachovia Bank, N.A.

–Long-term deposits at ‘AA’;

–Market-linked securities, certificates of deposits ‘AA
EMR’;

–Senior debt at ‘AA-‘;

–Short-term deposits at ‘F1+’;

–Subordinated debt at ‘A+’.

Wachovia Mortgage,
FSB

 

Wachovia Bank, FSB (Texas)

–Short-term deposits at ‘F1+’;

–Long-term deposits at ‘AA’.

Wells Fargo Financial, Inc.

–Long-term IDR at ‘AA-‘

–Senior debt at ‘AA-‘.

Wells Fargo Financial Canada Corp.

–Long-term IDR at ‘AA-‘;

–Short-term IDR at ‘F1+’;

–Senior debt at ‘AA-‘;

–Short-term debt at ‘F1+’.

Greater Bay Bancorp, Inc.

–Senior debt at ‘AA-‘.

Greater Bay Bank, N.A.

–Long-term deposits at ‘AA’.

Wachovia Corporation

–Commercial paper at ‘F1+’;

–Senior debt at ‘AA-‘;

–Subordinated debt at ‘A+’;

–Preferred stock at ‘BBB’.

Wachovia Capital Finance Corporation (Canada)

–Short-term IDR at ‘F1+’.

Congress Financial Capital Company

(guaranteed by Wells Fargo & Company)

–Long-term IDR at ‘AA-‘;

Wells Fargo Bank International

–Support at ‘1’;

–Long-term deposits at ‘AA-‘;

–Short-term deposits at ‘F1+’.

Golden West Financial Corporation

–Senior debt at ‘AA-‘.

SouthTrust Bank

–Senior debt at ‘AA-‘;

–Subordinated debt at ‘A+’.

First Union National – Florida

SouthTrust Corporation

WFC Holdings, Inc.

–Subordinated debt at ‘A+’.

Wells Fargo Capital II, X, XII

Wells Fargo Capital Trust VII, VIII

Wachovia Capital Trust II

Central Fidelity Capital Trust I

Corestates Capital II, III

First Union Capital II

–Preferred at ‘BBB+’.

Wachovia Capital Trust III

–Preferred at ‘BBB.’

Additional information is available at
‘www.fitchratings.com’. The ratings above were solicited by,
or on behalf of, the issuer, and therefore, Fitch has been compensated
for the provision of the ratings.

Applicable Criteria and Related Research:

–‘Global Financial Institutions Rating Criteria’ (Aug.
16, 2011);

–‘Bank Holding Companies’ (Aug. 16, 2011);

–‘Rating Bank Regulatory Capital and Similar Securities’
(Dec. 15, 2011).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171

Bank Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648612

Rating Bank Regulatory Capital and Similar Securities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656371

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