Download 2000 Annual Report - Wells Fargo History

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states, all 10 Canadian provinces, Caribbean, ..... our small business customers to build online stores, sell online, ac
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To Our Owners It's our single biggest challenge. It's our single biggest revenue opportunity. What is it?

Wells Fargo & Company (NYSE:WFC) is a diversified financial services companyproviding banking, insurance, investments, mortgage and consumer finance from

9 "They Just Did It." Great service happens when our people take personal ownership for customer problems. Here are the stories of 16 Wells Fargo team members who "just did it." 20 Serving our Communities Our commitment to outstanding service is more than just good business - it makes our communities better places to live and work, too. 26 The Businesses of Wells Fargo Banking,lnsurance,lnvestments, Mortgage, Consumer Finance ... and a whole lot more. We're one of the USA's most diversified financial services companies. Here's how it all fits.

about 5,400 stores, the industry's leading Internet site (wellsfargo.com) and other distribution channels across North America. Our corporate headquarters is in San Francisco but we're decentralized so that every local Wells Fargo store is a headquarters for satisfying all our customers'financial needs and helping them succeed financially. Assets: $272 billion Rank in size among U.S. peers: 4th Market value of stock: $95.2 billion Rank by market cap among U.S. peers: 2nd Total Team members: 117,000

30 Board of Directors, Corporate Officers 31 Senior Officers

Major Lines of Business

32 Service: State-by-State 33 Financial Review 52 Financial Statements 97 Independent Auditors' Report

o

Community Banking

42%

Investment/Insurance

15%

Specialized Lending

12%

Wholesale Banking

10%

Commercial Real Estate

o G

Home Mortgage/ Home Equity

11%

Consumer Finance

6%

4%

Based on historical averages and near future year expectations

Wells Fargo Community Banking USA's most extensive banking franchise. Serves 11 million households in 23 states from Ohio to Alaska.

Wells Fargo Home Mortgage USA's largest originator and servicer. Serves 4 million customers.

Wells Fargo Wholesale Banking Indudes U.S. Corporate and Commercial Banking, Capital Markets, Commercial Real Estate Lending. Serves 59,000 customers nationwide.

Wells Fargo Financial One of USA's leading consumer finance companies. 4.5 million customers in 47 states, all 10 Canadian provinces, Caribbean, Latin America, Guam and Saipan.

To Our Owners What's the IINext Stage lf for Wells Fargo? What's our company's single biggest challenge and our si gl biggest revenue opportunity? The answer is simple. It's the quality of our customer service. If we-as one team -cans

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this opportunity, I believe we can consistently

inc ease revenue ten percent or more and profits would we make forward-looking statements about our company's financlal condition, results of operations, plans, objectives and we use the words "believe,""expect,""anticipate:"estimate,""may,""can;"will" or similar expressions, we are making forward-looking statements.

FORWA R D- LOO KI N G STATE M ENTS In this report future performance and business. When

These forward-looking statements Involve Inherent risks and uncertainties. A number of factors -

grow even faster. We then will achieve our vision: satisfy all

many of which are beyond our control - could cause actual results to differ from those

In our forward-looking statements.These factors include:' changes In political, business and economic conditions, Including changes In interest rates' competition, including competition from Insurance companies and securities firms' fiscal and monetary policies' customers choosing not to use banks for transactions • legislation. including the Gramm-Leach-Bliley Act·

our customers' financial needs, help them succeed financially,

the Integration of the former Norwest and the former Wells Fargo' future mergers and acquisitions' the Integration of merged and acquired companies. We discuss in more detail on pagl'S 36·39 thesl' and other factors that could cause actual results to differ from those In our forward-looking statements.There are other factors not described in this report that could cause actual results to differ.

2001 Wells Fargo & Company. All rights reserved.

and be known as one of America/s great companies.

First, let's look back to see how far we've come. Our team has made outstanding progress since

• Excluding First Security, we achieved eight consecutive quarters of record net income, earnings per sha re, return on assets and return on equity.

of all 1/7,000 of our team members. Considering all we've

• Our price to earnings ratio at year-en I 2000 was almost twice that of our peer group-and our stock price rose

the merger of equals between Norwest and Wells Fargo more than two years ago.

Thanks to our 117,000 talented team members, Wells Fargo

pa~t

two

ye:H~-conversions,acquisition,

revenue and profit growth, increased market share, retaining eliminated due to the merger -we feel very good that there has been no broad deteriorarion in our customer service. We're at lea r as good as Ollr compct'itors. W/e consider that

tively.

• In California, home to one of every nine Americans,

quite an accomplishment. The question now is-can a company rh;lt wants to

grew 16 percent. We now touch two of every five of the

he great get there with average customer service? The answer

state's resident.

is no. We're great in many areas-financial performance,

• Wholesale Banking-serving commercial real estate and

product innovation sales success, returns to stockholders

achieved something never before accomplished in banking

corporate customers-grew its loan volume 15 percent.

history. We successfully merged and combined the systems

Sales calls, proposals and new relationships were up over

the one area in which we continue to be ahout average

25 percent.

compared with our peers. We're not alone. National surveys

of two large banks while delivering record cash earnings per share of $2.91, excluding First Security results for the

• Our mortgage company had its tenth

consecutiv~ year of

first nine months of 2000. That was 14 percent higher than

record earnings and regained its # I industry ranking in

last year. On a similar basis, we also had record revenue

both loan originations and loan servicing.

growth of more than 10 percent and increased market share. 1 believe ours was the largest and most complex systems conversion in banking history. In 2000 alone, we had 63 separate conversions, more than one a weekend. These conversions connected what now is America's most extensive

• Home equity loans grew over 20 percent company-wide and momhly originations via the lmernet increased four-fold. • Our consumer flnance business grew receivables by

and social responsibility. Cusromer service, however, is

show continued declines in customer satisfaction in many industries. Customer expectations, on the other hand, are rising. \'\fhen cusromers do get great service, it becomes the standard for what they e 'pect all the timc, Every customer wants special treatment all thc time. They deserve it. They're the customer. Service quality not only affects our customers, it

$2 billion, a 20 percent increase.

• am Internet site, wellsfargo.com-our fastest growing

affects our bottom line and your investment in Wells Fargo.

banking franchise-23 Midwestern and Western states

d istriburion cha nnel-surpassed 2.6 mill ion customers.

We cannot provide average service and expect to achieve

spanning more than 3,000 miles across five time zones from

That's two and a half times larger than two years ago.

superior financial performance. A lost customer is lost

Van Wert, Ohio, to Bethel, Alaska. The conversions affected

We're still adding 100,000 new customers a month, more

revenue. Once we lose customers, it's almo t impossible

more than 14 million banking customers, 2,900 banking

than two a minute. We have more daily, individual visitors

to get them back. Cood news travels fa~r. /)ad news travels

stores and 6,500 ATMs. The result is we now present

a month than Fidelity, American Express, Citibank, Bani

faster. Every customel' who gets poor service from a

ourselves as one hrand to our customers. They can save

of America or Schwab.

company ('ells lots of ot'her peopll:. IL costs us five times

more time and money than ever before and benefit frOI11 the convenience of one of North America's largest and most diversified financial services companies.

• Our Private Client Services businesses-investment'

Amazin,:l Progress What's amazing is this: • Our team completed these conversions six months ahead of schedule. • Each of these conversions was d'fficult and required thousands of our people to work many weekends and

as much to adel new customers as it Joes to keep those

management and brokerage-increased revenue about

we already have. Every two percent of customers we keep

20 percent. Since the merger, our brokerage sales team has

is equal to cutting costs ten percent'.

grown 80 percent and their productivity has

Nlost customers who leave a financial services company do so not because of inconvenience or complaints about

risen 41 percent.

products or fees. The)' leave hecause they feel no one cares. We've made

They leave because a series of evems or a combination of

outstanding progress. By itself, however, it cannot connect

circumstances makes them believe something is wrong with

us to the "Next Stage" of our company, ensure continued

the company's process for fixing their prohlem, They might

extra hours. They pulled together. They persevered. They

double digit revenue increases, and achieve our vision. As

leave, even though they're treated with courtesy, bec:llIse the

put the customer first. They connected. What a team!

our industry continues to grow and consolidate, we believe

problem doesn't get flxed or doesn't get fixed fast enough.

• In the midst of these conversions, we announced and

there's one key measure of performance that will separate the I ~o, now is as good a

began integrating 41 acquisitions with banking assets

winners from also-rans and have a major effect' on our market

of $40 billion (including the $23 billion First Security

share and stock price. New products and technology are not

time as any to face the facts anel put a stake in the ground.

Corporation and the $3 billion National Bancorp of

enough. They can be copied quickly. Efficiency is important

Our service is average to slighl'ly above average, We want

Alaska, Inc.). That's almost half the size of either the

but you cannot cost-Cllt your way to growth. Acquisitions

it to be great. We want ro give service t'hat is 110 percent.

former Norwest or the former Wells Fargo two )rears ago.

help us enter new markets and increase market share but

• We not on Iy earned more business from current customers

2 TO OUR OWNERS

achieved the

two thirds of our team members whose positions were

38 percent in 2000. • Loans and revenue across our 23-state Community Banking franchise grew 13 percent and 9 percent respec-

product sales grew 22 percent, loans and revenue each Dick Kovacevich, Presiden r & CEO

We believe it's this. Tbe quality of 0111' customer selVice. That is determined by the attitude, the caring, the commitment

We've known for many years that we're not' really in the

bigger is not always better. Cross-sell-earning all our

money business. Nloney is a cOl1lmodity. We're in the service

but gained market share and new customers. That's almost

customers' business-is absolutely critical but more sales

business. Service is not a commodity. It's the value added.

unheard of in the lLlidst of a major merger in any industry.

do not always creare satisfied customers. What's left? WELLS FARGO & COMPANY 3

Our Performance % Change

to someone else. The bigger a company is the more that happens. Bigger, however, is not always better. In fact, the bigger we become, the mailer we have to be. The bigger we are, the more important that each of our team members accepts individual responsibility and

... > .... cS S •...... ~

accountability. Customers can get lost in big companies. They don't always know the right person to turn to for help. Quite often they can be passed from one person, phone number, recorded message, voice mail or mouse click to another. Taking personal responsibility for the

Our Product is Service. We're not really in the money business. Money is a commodity. We're

customer is essential because every team member is Wells Fargo to that customer. That means we must become much

($ in millions, except per share amounts)

1999

2000/1999

AS REPORTED FOR THE YEAR

Net income

$

Net income applicable to common stock Earnings per common share

$

Diluted earnings per common share

-%

4,026

4,012

4,009

3,977

2.36

2.32

2

2.33

2.29

2

.90

.785

15

Average common shares outstanding

1,699.5

1,714.0

(1)

Diluted average common shares outstanding

1,718.4

1,735.4

(1)

Dividends declared per common share

Profitability ratios

better at giving our people authority to solve a customer's

Net income to average total assets (ROA)

problem-on the spot. If that means on occasion that a

Net income applicable to common stock to average

team member-trying to do the right thing for a customer-

2000

l.7B%

1.61%

(10)

16.31

17.55

(7)

$ 19,708

18,091

9

common stockholders' equity (ROE)

doesn't follow procedures exactly, so be it. Our most

Total revenue

in the service business. Time

important policy is "doing it right for the customer:'

Efficiency ratio Average loans

$145,577

$123,638

18

is money. Advice is money.

company-and in everyone of our businesses- for

Average assets

250,188

225,099

11

elevating service quality to the same level of importance

Average core deposits

145,793

139,310

5

Third, we're creating a consistent process across our

as sales. This includes having a common understanding

Net interest margin

Ollr product is service. The talent of our people sells

across the company-and in everyone of our businesses-

AT YEAR END

products. The quality of our service keeps customers coming

of what we mean by outstanding customer service. We do

Securities available for sale

back for more. We intend to distinguish ourselves from our

this as advocates for our customers-external and internal

Loans

-by putting them at the center of everything we do:

competitors in two important ways. First, we want to be advocates for our customers. We want to put them at the center of everything we do. We want to give them such outstanding service that they will give us all their business, honor us with repeat purchases and rave about us to their families, friends and business associates. Second, we want to understand tbeir needs so well and give them such sound

Empathizing-hI kl10w this can be upsetting."

60.0%

5.35%

Pl"Omising and delivering-" I'll call you back ill 10 minutes."

FOllnh, our goal is to reduce-by at least half-the

financial advice that we will help them become financially

annual rate at which we're losing customers. We lose one of

successful and they, in turn, will reward us with more of their

every five consumers every year due primarily to failures in

5.47%

133,004

Allowance for loan losses

3,719

3,344

11

Goodwill

9,303

8,046

16

272,426

241,053

13

Stockholders' equity

26,488

23,871

11

Tier 1 capital

16,096

15,010

7

Total capital

23,024

20,512

12

Capital ratios Common stockholders' equity to assets

9.63%

9.79%

(2)

Stockholders' equity to assets

9.72

9.90

(2)

8.00

(9) (5)

6.49

6.76

(4)

15.29

13.91

10

98,715

10

goals, decide the elements of our customer service programs,

Book value per common share

from across the company-has formed a SWAT team that

customer convinced the customer to give us even more of

addresses problems that need immediate fixing because

their financial services revenue. As we like to say, more sales

they're having a significant effect on our customers.

do not always result in better service but better service almost always results in more sales. In everyone of these

approaches with a problem will take personal responsibility

stories, the customer's impression of our entire company

for fixing it. It's human nature to wallt to hand off a problem

was defined by the quality of service that one team member

Since 1995, our net income has grown ot a compound annual rate of 16%, among the best in our industry.

$

108,727

ADJUSTED CASH BASIS**

Net income

do it. They just did it. Tn many cases their advocacy for the

$

Team members (active, full-time equivalent)

decided to take personal ownership of a customer's problem and wouldn't let go until it was solved. No one told them to

Second, we expect that the first team member a customer

Leverage

every day-has one thing in common. Each team member

those problems. This group-made up of senior managers

0

16 Vo

Risk-based capital

FOR THE YEAR

identify service problems, and commit resources to fix

00

Compound Annual Growth Rate (5 years)

10.93

First, we've created a Customer Experience Team to set

99

11

7.29

selected from among hundreds that occur at Wells Fargo

98

13

10.43

expect to do it.

97

23,600

Total capital

customer service across our company. Each of these stories-

96

138,247

Tier 1 capital

because your competitors can't copy it. Here' how we

95

26,221

but that doesn't make it acceptable. Cutting our annual

On pages 9-19, you'll find 12 stories of outstanding

In financial services, the name ofthe game is revenue growth- the ability ta earn more af our customers'business.

156,710

from us, about double what they have with us today.

do, however, is a competitive advantage if you get it right

0

16 Vo

Common stockholders' equity

That may not be unusual for a financial services company

ten percent.

Revenue (billions)' Compound Annual Growth Rate (S years)

00

Net Income (billions)'

our processes or in our attitude. One of every five-gone!

to achieve them. This is hard to do. Anything hard to

99

21

business. We want everyone of our consumer households

customer loss by half would, alone, increase our revenue

98

(12)

$ 43,911

and business customers to buy an average of eight products Yes, these are ambitious goals. Yes, it will take time

97

(2)

161,124

Assets

96

2

$ 38,655

Core deposits

Taking charge-''l'1I talw care of that for you."

S8.8%

95

Net income applicable to common stock Diluted earnings per common share

on ":

$

4,860

4,304

13%

4,843

4,269

2.91

2.56

13 14

2.18%

2.22%

(2)

Profitability ratios Net income to average total assets (ROA) Net income applicable to common stock to average common stockholders' equity (ROE) Total revenue

34.58

34.08

$ 19,088

$ 16,775

95

on on

N

96

on

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