IMGCAP(1)]
Tomorrow could be the day the financial community learns whether the planned
merger between Wells Fargo & Co. and Wachovia Corp. will receive a green light.
The two banks announced a deal Oct. 3 that would nearly double the size of Wells'
ATM network and would give the San Francisco-based bank a coast-to-coast presence in 39 states.
The agreement also would marry two of the five largest debit card issuers, solidifying Wells as the nation's second-largest debit card issuer, according to PaymentsSource.com, SourceMedia's financial-information Web
site.
The deal, however, is far from certain, according to analysts. Wells and Wachovia
announced the deal just days after Citigroup Inc. announced its own agreement to buy Wachovia, which is based in Charlotte, N.C., in a government-orchestrated deal.
On Oct. 3, New York-based Citigroup issued a news release saying it will fight any
agreement between Wells and Wachovia. "Citi has demanded that Wachovia and
Wells Fargo terminate and not proceed with any proposed transaction. Citi has substantial legal rights regarding Wachovia and this transaction," Citi wrote in a news release.
Two weeks earlier, Wells had agreed to buy Wachovia but backed out at the last minute, says Judson Murchie, an analyst with Boston based based Aite Group. The Federal Deposit Insurance Corp. engineered a deal in which Citi would buy
Wachovia's retail business with FDIC assistance. Citi and Wells Fargo have gone to court over their dueling proposals to buy Wachovia. At the urging of the Federal
Reserve Board, both banks agreed to suspend prosecution of the cases in state and federal courts in an attempt to work out an agreement. Both parties hope reach an agreement by Oct. 10. They were scheduled to settle their differences noon Wednesday but failed in that quest.
Wells and Wachovia may have a better understanding of the public's mood and the
pressure on government regulators not to bail out large corporations, Murchie says.
"The agreement between Wells and Wachovia is a much cleaner for the public
and regulators because the government is not involved," he adds. "The public already is very upset with the $700 billion bailout package that Congress approved to help Wall Street." Congress passed the bailout bill last week, and President Bush signed it into law Oct. 3.
If the deal goes through, Wells would remain the third-largest ATM network with
12,227 ATMs. Wells operates 6,950 ATMs, and Wachovia owns 5,277 machines,
according to PaymentsSource.com. If the deal between Citi and Wachovia were to proceed, Citi would have 8,577 ATMs, jumping ahead of Wells.
Charlotte-based Bank of America Corp. owns the largest ATM network with 18,531
machines, and JPMorgan Chase & Co., which recently purchased Seattle-based
Washington Mutual Inc., has the second largest network with 14,272 machines.
A combined Wells/Wachovia would give Wells a stronger presence nationally, particularly along the East and West Coasts and in the Midwest. "The acquisition will establish a Wells Fargo community-banking presence for the first time in Alabama, Connecticut, Delaware, Florida, Georgia, Kansas, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and Washington DC," Wells said in a statement. Wells already has a banking presence in 24 western states. The bank also has operations in Illinois, Indiana, Iowa, Michigan and Minnesota.
In the debit card market, Wells is the second- largest issuer, with 17.5 million cards on issue as of the end of 2007, according to PaymentsSource.com. Wachovia is the fifth largest with 10.4 million cards, giving the companies a combined total of 27.9 million debit cards, most of which are Visa-branded. Both banks also issue relatively few ATM cards that do not support signature-based transactions.
"Wells Fargo will consolidate its spot as the second-largest issuer of debit cards.
However, it will be within reach of Bank of America," says Adil Moussa, an analyst
with Aite Group. BofA at the end ofDecember had issued an estimated 33.4
million debit cards, according to PaymentsSource.com.
"The new Wells Fargo [would] boast approximately $90 billion in debit transactions.
Wells Fargo, a Visa issuer, also will be in a better place to negotiate fees with Visa,"
Moussa says. Another beneficiary of a deal between Wells and Wachovia would be
Wincor Nixdorf AG, a Paderborn, Germany based ATM maker, says Gil Luria, an analyst with Wedbush Morgan Securities in Los Angeles. "As Wells Fargo has upgraded its ATM network, it has turned to Wincor Nixdorf," Luria says.
Wachovia also would add $2.4 billion in credit card loans on a managed basis to
Wells' nearly $20 billion, according to PaymentsSource.com. Wells is ranked
eighth in terms of managed credit card loans, while Wachovia ranks at 22nd.
PaymentsSource.com estimates that Wachovia would add 2.5 million credit cards
to Wells' 20.7 million.
