Week by week we continue to see Wells Fargo kicking itself over Wachovia assets that it absorbed when it merged with Wachovia.
FT Alphaville grabbed comments from the company’s pre-recorded conference call:
. . . we are seeing signs of stability in our credit portfolio and based on our current economic outlook, we expect credit losses to peak in 2010 with consumer losses potentially peaking in first half of the year and gradually declining as the year progresses. We have substantially less exposure to credit cards than our peers with large, national credit card portfolios. Where we do have large exposure, in commercial and commercial real estate, we are comfortable with how the legacy Wells Fargo portfolios were underwritten and are performing and we’ve previously written down the Wachovia portfolios at close of that acquisition late last year.
It doesn’t end there.
. . . We are on track – if not ahead – in terms of reducing Wachovia’s credit risk. We have dealt with this in several ways. At merger closing we built significant reserves for credit losses including conforming credit loss emergence practices to the more conservative practices of Wachovia and Wells Fargo. Second, through purchase accounting we wrote down the higher risk segments of Wachovia’s loan portfolios including the portion of their commercial real estate portfolio with the highest probability of default. Unlike other banks that have yet to incur losses on the highest risk portions of their loans, we have already accounted for these losses. Overall we believe our life of loan loss estimate originally assumed still holds, with commercial a little higher and Pick-a-Pay lower.