Wachovia Historical Financial Press Releases

January 22, 2008
Wachovia Earns $6.3 Billion, EPS of $3.26 Per Share in Full Year 2007
In tough economic environment, 4th quarter net income was $51 million, or 3 cents per share

4th QUARTER 2007 COMPARED WITH 4th QUARTER 2006

Lower earnings largely reflect the effect of continued disruption in the capital markets, which resulted in net valuation losses of $1.7 billion as well as a provision for credit losses of $1.5 billion, which exceeded net charge-offs by $1.0 billion.
Net interest income grew modestly, while fee income declined substantially due to the market disruption. Strong momentum in fiduciary and asset management fees and commissions due to the A.G. Edwards acquisition and solid organic growth.
Provision expense increased largely reflecting heightened portfolio risks relating to recent significant deterioration in the housing market as well as loan growth.
Average loans up 9 percent with strength in commercial lending and auto lending. Average deposits grew 8 percent particularly in money market accounts and certificates of deposit. Strong momentum continued in net new checking accounts, which increased 935,000 in 2007, including 100,000 generated in the former World Savings branch network.
Tier 1 and total capital ratios increased from the third quarter of 2007 following the issuance of $2.3 billion of preferred stock and $838 million of trust preferred.
Income tax benefit of $285 million principally reflects a reduction in the full year tax rate given a lower than expected level of earnings.
Customer loyalty scores maintain near record 53%; organic customer acquisition grew 15% annualized.

Lines of Business Highlights: General Bank, Wealth Management, Corporate and Investment Bank, Capital Management

CHARLOTTE, N.C. – Wachovia Corp. (NYSE:WB) today reported net income of $51 million, or 3 cents per share, in the fourth quarter of 2007 compared with $2.30 billion, or $1.20 per share, in the fourth quarter of 2006.

Excluding after-tax net merger-related expenses of 5 cents per share in the fourth quarter of 2007 and 1 cent per share in the fourth quarter of 2006, earnings were $160 million, or 8 cents per share, in the fourth quarter of 2007 compared with $2.33 billion, or $1.21 per share, in the fourth quarter of 2006.

Full year 2007 net income was $6.31 billion, down 19 percent from $7.79 billion in 2006, and earnings per share were down 30 percent from 2006 to $3.26. Excluding after-tax net merger-related expenses of 8 cents in 2007 and 7 cents in 2006, earnings in 2007 were $6.47 billion, or $3.34 per share, compared with $7.91 billion, or $4.70 per share, in 2006.

"The continued turmoil in the capital markets and the dramatic change in the credit environment diminished our fourth quarter results substantially,” said Ken Thompson, Wachovia chairman and chief executive officer. “We took active and prudent steps in the second half of the year to deal with the market disruption and credit deterioration, and we believe this allows us to move forward from a position of strength despite the uncertain economic environment. For the full year, we earned $6.3 billion, paid $4.6 billion in dividends, and maintained a well-capitalized balance sheet even as we had $3.1 billion in net market-related valuation losses and increased our allowance for credit losses by $1.2 billion. Our management team and dedicated employees are focused intently on the strategic priorities that prepared us well for this more difficult economic environment: controlling expenses, managing risk appropriately, creating revenue synergies between our businesses, and continuing to provide industry-leading customer service. We’re excited about the future with our new partners from A.G. Edwards and with our newest banking markets in some of the nation's fastest growing and affluent regions.”

Results in 2007 included the impact of the acquisition of A.G. Edwards, Inc., a retail brokerage firm headquartered in St. Louis, Missouri. This transaction was consummated on October 1, 2007, and the retail brokerage business was consolidated into Wachovia Securities LLC on January 1, 2008. Integration activity will continue through 2009.

In the fourth quarter of 2007 compared with the fourth quarter of 2006, Wachovia:

Generated revenue of $7.2 billion on higher loan and deposit balances driven primarily by organic growth, while fee and other income declined due to net market disruption-related valuation losses of $1.7 billion and significantly reduced fee income related to the disruption in the capital markets.
Increased net interest income modestly, reflecting higher average commercial loans, up 22 percent, and average consumer loans, up 1 percent, as well as solid deposit growth.
- Commercial loan growth was led by middle-market commercial, large corporate and international lending, while consumer loan growth, which benefited from lower mortgage prepayments, was led by traditional mortgage lending and auto loans.
- Average core deposits rose 8 percent and average low-cost core deposits were up 5 percent.
- Growth in lower spread loans and other earning assets, a shift in deposit mix and the effects of the inverted yield curve resulted in 21 basis points of margin compression, although the margin decline slowed to 4 basis points from the third quarter of 2007.
Generated growth in fee and other income in key relationship management areas, with strength in service charges, up 11 percent, and higher commissions, up 53 percent, primarily related to the addition of A.G. Edwards. Asset management fees reached a new high, reflecting continued growth in retail brokerage managed account fees, trust and investment fees, and the addition of A.G. Edwards. Trading, securities losses and other income reflected the net valuation losses related to the market disruption.
Recorded a 17 percent increase in noninterest expense largely reflecting the acquisition impact.
Recorded a provision for credit losses of $1.5 billion, which exceeded net charge-offs by $1.0 billion. The provision largely reflected the recent significant deterioration in the residential housing market and the related portions of the commercial real estate portfolio, including higher expected loss factors for the consumer real estate and auto loan portfolios, and for the commercial portfolios following an extensive review of a large portion of the real estate financial services portfolio in light of this deterioration. Net charge-offs were $461 million, or an annualized 0.41 percent of average net loans. Total nonperforming assets including loans held for sale were $5.2 billion, or 1.08 percent of loans, foreclosed properties and loans held for sale, largely reflecting increases in consumer due to the effects of the weakened housing industry.

Lines of Business

The following discussion covers the results for Wachovia’s four core business segments and is on a segment earnings basis, which excludes net merger-related and restructuring expenses, other intangible amortization and discontinued operations. Segment earnings are the basis on which Wachovia manages and allocates capital to its business segments.

Pages 14 and 15 include a reconciliation of segment results to Wachovia’s consolidated results of operations in accordance with GAAP.

General Bank

The General Bank includes retail, small business and commercial customers. The fourth quarter of 2007 compared with the fourth quarter of 2006 included:

Earnings of $1.2 billion, down $271 million, driven by a small decrease in revenue, a higher provision for credit losses and higher noninterest expense.
A continued shift in the business mix reflecting customer preferences for fixed rate instead of variable rate loans and certificates of deposit over demand deposits.
Average loan growth of 6 percent, reflecting double digit growth in wholesale businesses and small business, and 4 percent growth in consumer loans.
6 percent deposit growth led by consumer certificates of deposit, up $15.2 billion, and money market deposits, up $3.0 billion from year-end 2006. Net new retail checking accounts increased by 90,000 in the fourth quarter of 2007 compared with an increase of 87,000 in the fourth quarter of 2006. For the full year, net new retail checking accounts increased 935,000 in 2007 compared with an increase of 554,000 in 2006; this increase included more than 100,000 generated in the former World Savings branch network.
Modest growth in fee and other income, with double digit growth in service charges and interchange income offsetting lower mortgage banking fee income and losses of $30 million on the sale of student loans.
Noninterest expense up 11 percent, with expenses up across the board as organizational realignment drove salaries and severance costs higher. De novo branch activity continued, with 109 branches added and 128 consolidated in full year 2007. The increased investment drove the General Bank’s overhead efficiency ratio up 516 basis points to 48.52 percent.
A $181 million increase in the provision for credit losses largely reflecting significant deterioration in consumer real estate, as well as losses in auto, partially offset by a decline in commercial real estate losses.

Wealth Management

Wealth Management includes private banking, personal trust, investment advisory services, charitable services, financial planning and insurance brokerage. The fourth quarter of 2007 compared with the fourth quarter of 2006 included:

Modest earnings growth to $85 million on 5 percent revenue growth, offset by 3 percent growth in expense and higher provision for credit losses.
Strong fiduciary and asset management fees related to a pricing initiative implemented in the third quarter and other growth, all of which contributed to 8 percent growth in fee and other income. Insurance commissions declined largely due to nonstrategic insurance account dispositions.
2 percent growth in net interest income on 10 percent average loan growth, which offset spread compression.
An increase in expense on modest growth in salaries and benefits including higher non-merger severance costs.

Corporate and Investment Bank

The Corporate and Investment Bank includes corporate lending, investment banking, and treasury and international trade finance. Fourth quarter 2007 results compared with the fourth quarter of 2006 included:

A segment loss of $596 million driven by $1.6 billion in net valuation losses reflecting continued disruption in the capital markets and reduced origination volume in most market-related businesses.
Market valuation losses, net of applicable hedges, of:
- $1.0 billion in subprime residential asset-backed collateralized debt obligations and other related exposures, compared with $350 million in the prior quarter;
- $600 million in commercial mortgage structured products, compared with $488 million in the prior quarter;
- $123 million in consumer mortgage structured products, compared with $82 million in the prior quarter;
- $93 million gain in leveraged finance net of fees, compared with a net $272 million in losses in the prior quarter; and
- $59 million net gain in non-subprime collateralized debt obligations and other structured products, compared with $109 million net loss in the prior quarter.
A 27 percent increase in net interest income, which reflected 26 percent growth in average loans particularly in real estate products in growth markets and international lending in emerging markets, as well as a shift from originate, warehouse and sell to originate and hold assets on the balance sheet.
Lower principal investing compared with strong results in the prior year quarter and particularly from a very strong third quarter of 2007.
Lower noninterest expense primarily related to lower incentive compensation.
Provision of $112 million largely reflecting residential-related commercial real estate losses.

Capital Management

Capital Management includes retail brokerage services and asset management. The fourth quarter of 2007 compared with the fourth quarter of 2006 included:

Earnings of $350 million on 56 percent revenue growth, which reflected strength in retail brokerage managed account fees as well as the acquisitions of A.G. Edwards on October 1, 2007, and European Credit Management Ltd. (ECM) on January 31, 2007. Growth was partially offset by an additional $17 million valuation loss related to certain asset-backed commercial paper investments purchased in the third quarter of 2007 from Evergreen money market funds.
Managed assets growth of 52 percent from year-end 2006 to $203.5 billion at year-end 2007, including $44.0 billion from A.G. Edwards.
60 percent growth in noninterest expense largely due to the effect of the A.G. Edwards and the ECM acquisitions, as well as higher commissions and litigation expense.

Total assets under management of $274.7 billion at December 31, 2007, decreased 1 percent from December 31, 2006, as the addition of $29.9 billion from acquisitions, net money market fund inflows of $9.3 billion and approximately $4.5 billion in market appreciation were offset by the $34.5 billion change in investment discretion of assets under management now solely managed by Wealth and other net outflows of $13.3 billion primarily related to the loss of one institutional client with minimal revenue impact. Total brokerage client assets grew 54 percent from year-end 2006 to $1.2 trillion, including $371.1 billion from A.G. Edwards.

Wachovia Corporation (NYSE:WB) is one of the nation's largest diversified financial services companies, with assets of $782.9 billion and market capitalization of $75.3 billion at December 31, 2007. Wachovia provides a broad range of retail banking and brokerage, asset and wealth management, and corporate and investment banking products and services to customers through 3,400 retail financial centers in 21 states from Connecticut to Florida and west to Texas and California, and nationwide retail brokerage, mortgage lending and auto finance businesses. Globally, clients are served in selected corporate and institutional sectors and through more than 40 international offices. Our retail brokerage operations under the Wachovia Securities brand name manage more than $1.2 trillion in client assets through 17,900 registered representatives in 1,500 offices nationwide. Online banking is available at wachovia.com; online brokerage products and services at wachoviasec.com; and investment products and services at evergreeninvestments.com.

Forward-Looking Statements

This news release contains various forward-looking statements. A discussion of various factors that could cause Wachovia Corporation's actual results to differ materially from those expressed in such forward-looking statements is included in Wachovia's filings with the Securities and Exchange Commission, including its Current Report on Form 8-K dated January 22, 2008.

Explanation of Wachovia’s Use of Certain Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this news release includes certain non-GAAP financial measures, including those presented on page 1 and on page 11 under the captions “Earnings Excluding Merger-Related and Restructuring Expenses, and Discontinued Operations” and “Earnings Excluding Merger-Related and Restructuring Expenses, Other Intangible Amortization and Discontinued Operations”, and which are reconciled to GAAP financial measures on pages 23 and 24. In addition, in this news release certain designated net interest income amounts are presented on a tax-equivalent basis, including the calculation of the overhead efficiency ratio.

Wachovia believes these non-GAAP financial measures provide information useful to investors in understanding the underlying operational performance of the company, its business and performance trends and facilitates comparisons with the performance of others in the financial services industry. Specifically, Wachovia believes the exclusion of merger-related and restructuring expenses, discontinued operations and the cumulative effect of a change in accounting principle permits evaluation and a comparison of results for on-going business operations, and it is on this basis that Wachovia’s management internally assesses the company’s performance. Those non-operating items are excluded from Wachovia’s segment measures used internally to evaluate segment performance in accordance with GAAP because management does not consider them particularly relevant or useful in evaluating the operating performance of our business segments. In addition, because of the significant amount of deposit base intangible amortization, Wachovia believes the exclusion of this expense provides investors with consistent and meaningful comparisons to other financial services firms. Wachovia’s management makes recommendations to its board of directors about dividend payments based on reported earnings excluding merger-related and restructuring expenses, other intangible amortization, discontinued operations and the cumulative effect of a change in accounting principle, and has communicated certain dividend payout ratio goals to investors on this basis. Management believes this payout ratio is useful to investors because it provides investors with a better understanding of and permits investors to monitor Wachovia’s dividend payout policy. Wachovia also believes the presentation of net interest income on a tax-equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry standards. Wachovia operates one of the largest retail brokerage businesses in our industry, and we have presented an overhead efficiency ratio excluding these brokerage services, which management believes is useful to investors in comparing the performance of our banking business with other banking companies.

Although Wachovia believes the above non-GAAP financial measures enhance investors’ understanding of its business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP basis financial measures.

Earnings Conference Call and Supplemental Materials

Wachovia CEO Ken Thompson and CFO Tom Wurtz will review Wachovia's fourth quarter 2007 results and present an outlook for 2008 in a conference call and audio webcast beginning at 11 a.m. Eastern Standard Time today. This review may include a discussion of certain non-GAAP financial measures. Supplemental materials relating to fourth quarter results, which also include a reconciliation of any non-GAAP measures to Wachovia’s reported financials, are available on the Internet at Wachovia.com/investor, and investors are encouraged to access these materials in advance of the conference call.

Webcast Instructions: To gain access to the webcast, which will be "listen-only," go to Wachovia.com/investor and click on the link "Wachovia Fourth Quarter Earnings Audio Webcast." In order to listen to the webcast, you will need to download either Real Player or Media Player.

Teleconference Instructions: The telephone number for the conference call is 888-357-9787 for U.S. callers or 706-679-7342 for international callers. You will be asked to tell the answering coordinator your name and the name of your firm. Mention the conference Access Code: WB Investor.

Replay: Tuesday, January 22, by 1:00 p.m. EST and continuing through 5 p.m. EST Friday, March 21. Replay telephone number is 706-645-9291; access code: 26047152.

Investors seeking further information should contact the Investor Relations team: Alice Lehman at 704-374-4139 or Ellen Taylor at 704-383-1381. Media seeking further information should contact the Corporate Media Relations team: Mary Eshet at 704-383-7777 or Christy Phillips at 704-383-8178.

Wachovia common stock trades on the New York Stock Exchange (NYSE) under the ticker symbol WB. Before the September 1, 2001, merger of First Union and the former Wachovia, the common stock traded on the NYSE as FTU.

Information on this site dated after September 1, 2001, is provided under the Wachovia name, while historical information dated before September 1, 2001, is provided under the First Union name. Please note that historical information may have become out of date and should not be considered current. Wachovia does not undertake any obligation to update the information as a result of new information or subsequent developments. In addition, any forward-looking information is subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Factors that could cause results to differ from expectations may be found in Wachovia's reports filed with the SEC.

Historical Financial Press Releases

4th QUARTER 2007 COMPARED WITH 4th QUARTER 2006

Lines of Business

General Bank

Wealth Management

Corporate and Investment Bank

Capital Management

Forward-Looking Statements

Explanation of Wachovia’s Use of Certain Non-GAAP Financial Measures

Earnings Conference Call and Supplemental Materials

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