Wells Fargo & Co said it has completed its roughly $12.7 billion purchase of Wachovia Corp, a big bet that it properly assessed the risks in Wachovia's huge book of mortgage and real estate loans. The merger closed on Wednesday and more than doubles the size of Wells Fargo, creating the fourth-largest US bank by assets.
Wells Fargo also has the nation's largest branch network, with more than 6,600 offices in 39 states and Washington, D.C., and one of its largest retail brokerages. San Francisco-based Wells Fargo agreed on October 3 to buy Wachovia, beating out a smaller bid by Citigroup Inc for part of Wachovia. Citigroup's bid included government backing, while Wells Fargo's did not. Wells Fargo said Wachovia branches will keep their brand name at least for the "near future."
Regulators pushed Wachovia to find a buyer after the Charlotte, North Carolina, bank was throttled by soaring losses on "option" adjustable-rate mortgages it took on when it bought California lender Golden West Financial Corp in 2006. Last month, Wells Fargo said it expects to write down $71.4 billion of Wachovia's $482.4 billion loan portfolio, including $36 billion of option ARMs and $9.6 billion of commercial real estate.
Analysts have said Wells Fargo appeared cautious in assessing risks in Wachovia's mortgage portfolio, but the US economy and housing market have continued to deteriorate.
"We're not at the end" of the housing slump, Wells Fargo Chief Executive John Stumpf said on December 10 at a conference. "But we're starting to see some early signs that maybe we've reached the bottom in housing or close to it."