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TEXT-Fitch affirms Wells Fargo's ratings following peer review
October 30, 2012 / 5:01 PM / in 5 years

TEXT-Fitch affirms Wells Fargo's ratings following peer review

Oct 30 - Fitch Ratings has completed a peer review of the following 14 rated
large regional banks : BB&T Corporation (BBT), Capital One Finance
Corporation (COF), Comerica Incorporated (CMA), Fifth Third
Bancorp (FITB), Huntington Bancshares Inc (HBAN), Keycorp
 (KEY), M&T Bank Corporation (MTB), PNC Financial Services Group
 (PNC), Regions Financial Corporation (RF), SunTrust Banks Inc
 (STI), US Bancorp (USB), UnionBanCal Corporation (UBC), Wells
Fargo & Company (WFC), and Zions Bancorporation (ZION). Refer to the
release titled 'Fitch Affirms Large Regional Bank Ratings Following Industry
Peer Review' for a discussion of rating actions taken on the other large
regionals banks.


WFC's ratings were affirmed at 'AA-', primarily reflecting the company's strong
earnings profile, solid liquidity position, and sound capital ratios. These
strengths are offset by a growing concentration to the residential mortgage
market and weaker than average asset quality ratios.

WFC has a meaningful exposure to the residential real estate market as a result
of its #1 market share in origination and servicing, its large portfolio of
first and second lien mortgages and mortgage-backed securities portfolio. The
exposure has increased in the last year reflecting increased origination
activity and retrenchment of key competitors. Fitch views this concentration as
a potential source of rating sensitivity for WFC, though there are no direct
rating implications at this time. Fitch expects this concentration to moderate
over time as the current refinancing boom slows, competitors become more active
and WFC grows other consumer loan books, as well as its commercial portfolio.

WFC's MSR asset also has meaningful capital implications under Basel III. As of
Sept. 30, 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 MSRs increase in value, deductions to
capital ratios may result 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


With a long-term Issuer Default Rating (IDR) of 'AA-', WFC is among the highest
rated banks in the U.S., and as such, Fitch sees limited upside potential in
WFC's ratings. Conversely, 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. Lastly, large scale reforms in the mortgage industry or
failure to maintain earnings at current levels would also likely prompt a review
of WFC's ratings.

RATING DRIVERS AND SENSITIVITIES - Support Ratings and Support Floor Ratings:

WFC's Support Rating of '1' and Support Floor Rating of 'A' reflect its systemic
importance to the U.S. This viewpoint was broadly discussed in Fitch's special
report titled 'U.S. Banks - Sovereign Support: When Does it End' dated Dec. 15,
2011. Fitch could reassess its support ratings for U.S. G-SIFIs if global market
conditions normalize and resolution regimes become more harmonized across
international jurisdictions. That said, WFC's IDR of 'AA-' does not currently
incorporate any government support, and reflects it standalone strength only.

RATING DRIVERS AND SENSITIVITIES - Subordinated Debt and Other Hybrid

Subordinated debt and hybrid capital instruments issued by the banks are notched
down from the issuers' Viability Ratings (VRs) in accordance with Fitch's
assessment of each instrument's respective non-performance and relative loss
severity risk profiles, which vary considerably. The ratings of subordinated
debt and hybrid securities are sensitive to any change in the banks' VRs or to
changes in the banks' propensity to make coupon payments that are permitted but
not compulsory under the instruments' documentation.


All of the entities reviewed in the Large Regional Bank Group have a bank
holding company (BHCs) structure with the bank as the main subsidiary. All
subsidiaries are considered core to parent holding company supporting equalized
ratings between bank subsidiaries and bank holding companies. IDRs and VRs are
equalized with those of its operating companies and banks reflecting its role as
the bank holding company, which is mandated in the U.S. to act as a source of
strength for its bank subsidiaries. Double leverage is right at or below 120%
for all the parent companies reviewed in this peer group.

RATING DRIVERS AND SENSITIVITIES - Subsidiary and Affiliated Company Rating:

All of the entities reviewed in the Large Regional Bank Group factor in a high
probability of support from parent institutions to its subsidiaries. This
reflects the fact that performing parent banks have very rarely allowed
subsidiaries to default. It also considers the high level of integration, brand,
management, financial and reputational incentives to avoid subsidiary defaults.

Fitch has affirmed the following ratings:

Wells Fargo & Co.
--Long-term IDR at 'AA-'; Outlook Stable
--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-'; Outlook Stable
--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-'; Outlook Stable
--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 Canada Corp.
--Long-term IDR at 'AA-'; Outlook Stable
--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+'.

Wells Fargo Bank International
--Support at '1';
--Long-term deposits at 'AA-';
--Short-term deposits at 'F1+'.

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.'

The following ratings are affirmed and withdrawn since there is no debt
outstanding at either of these entities, and WFC does not currently plan on
issuing debt out of these entities in the future.

Wells Fargo Financial, Inc.
Congress Financial Capital Company

--Long-term IDR at 'AA-'.

Additional information is available at The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

In addition to the source(s) of information identified in Fitch's Master
Criteria, these actions were additionally informed by information provided by
the companies.

Applicable Criteria and Related Research:
--'Risk Radar' (Oct. 15, 2012);
--'U.S. Banks: Rationalizing the Branch Network (Witness the Incredible
Shrinking Branch Network)' (Sept. 17, 2012);
--'U.S. Banks: Mortgage Representations and Warranties (Banks Increase Reserves;
Uncertainty Remains)' (Aug. 20, 2012);
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);
--'Treatment of Unrealized Losses in U.S. Bank Capital Rule Proposal
(Pro-Cyclical Capital Policy to Create Greater Capital Volatility for Banks)'
(Aug. 7, 2012);
--'Basel III: Return and Deleveraging Pressures' (May 17, 2012);
--'Rating Bank Regulatory Capital and Similar Securities' (Dec. 15, 2011);
--'U.S. Banks - Sovereign Support: When Does it End' (Dec. 14, 2011).

Applicable Criteria and Related Research:
Risk Radar October 2012
U.S. Banks: Rationalizing the Branch Network (Witness the Incredible Shrinking
Branch Network)
U.S. Banks: Mortgage Representations and Warranties (Banks Increase Reserves;
Uncertainty Remains)
Global Financial Institutions Rating Criteria
Rating FI Subsidiaries and Holding Companies
Treatment of Unrealized Losses in U.S. Bank Capital Rule Proposal (Pro-Cyclical
Capital Policy to Create Greater Capital Volatility for Banks)
Basel III: Return and Deleveraging Pressures
Rating Bank Regulatory Capital and Similar Securities
U.S. Banks - Sovereign Support: When Does it End -- Amended

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