Fitch Affirms Wells Fargo & Company; Outlook Stable

  Fitch Affirms Wells Fargo & Company; Outlook Stable

Business Wire

CHICAGO -- July 17, 2012

Fitch Ratings has affirmed Wells Fargo & Co's (WFC) 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 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 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 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
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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