Wells Fargo & Co. (WFC) is right on track with its integration of Wachovia. In this regard, Wells Fargo has completed the conversion of Wachovia Community Banking Operations in 363 Stores in Florida. This included Wachovia banking locations across north and central Florida and the greater Tampa.
As a result of this conversion, over 4.6 million Florida customers would now be able to avail products and services from the 363 Wells Fargo stores and access over 500 ATMs across that part of the state.
The company will convert the Wachovia banking locations in the southern half of Florida to Wells Fargo stores in July. The conversion process will continue in other eastern states through 2011.
Last month, Wells Fargo announced that it will complete the transition of the remaining Wachovia signs and systems by mid-October 2011. Specifically, Wachovia stores at Virginia will be converted in August, those at Maryland, South Carolina, and Washington, D.C. in September and finally the ones at North Carolina will come under the Wells Fargo wing in October.
The conversion of 868 stores and 1,487 ATMs in the four states and the District of Columbia will complete the transition from Wachovia to Wells Fargo.
Wells Fargo purchased Wachovia in December 2008, in a $12.7 billion all-stock deal, after Wachovia suffered due to its exposure to bad mortgages right before the housing bubble burst.
Our Take
Wells Fargo’s growth plans have historically included a large number of acquisitions, Wachovia being the largest addition. The company also announced in May that it will acquire substantially all of the US-based operating assets of Foreign Currency Exchange Corporation, a wholly owned subsidiary of the Bank of Ireland Group (IRE) in an effort to expand its international banking capabilities.
The deal is expected to substantially strengthen Wells Fargo’s foreign currency exchange capabilities for domestic correspondent banks.
The company has demonstrated its ability to assimilate local franchises, offering a wider range of products than the acquired company could have had, thus increasing the number of options for customers to choose from. This has been the driving force behind its growth in the recent years.
Looking forward, the merger with Wachovia offers significant potential for growth prospects and above-average profitability in the longer term.
However, we believe that revenue will remain challenged given the tepid economic recovery with a lackluster loan growth and legacy mortgage issues. In addition, regulatory issues also pose as headwinds for the company’s top line.
Wells Fargo shares retain a Zacks #4 Rank, which translates into a short-term Sell rating. However, considering the fundamentals, we are maintaining a long-term Neutral recommendation on the stock.
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