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Fitch: Wells Fargo/Wachovia Deal a Credit Positive for Bondholders

NEW YORK-(Business Wire)-October 3, 2008 - Wells Fargo & Company's (WFC) definitive agreement to acquire Wachovia Corporation (Wachovia) and subsidiaries is a vastly improved deal for bondholders (from the Citigroup deal) that more than doubles WFC's balance sheet and branch network and offers WFC the opportunity to transform itself into a coast to coast banking operation, according to Fitch Ratings, which has affirmed WFC's Issuer Default Rating (IDR) at 'AA' on the announcement.

Separately, Fitch has upgraded Wachovia's IDR to 'A+' from 'BB-' and placed it on Rating Watch Positive, along with the 'A+' senior debt of Wachovia and subsidiaries. A complete ratings list follows the end of the release.

While not immune from the pressures on consumer and residential real estate loans, WFC has fared relatively better than many others operating in this space. Additionally, while every merger has integration risks, WFC's track record with large acquisitions has been excellent, which bodes well for its whole company transaction of Wachovia.

Fitch's upgrade of Wachovia's ratings reflects the reduced uncertainty regarding the creditworthiness of the Wachovia holding company post closing. In the transaction with Citigroup, the holding company was to remain independent. Fitch had taken numerous actions on Wachovia's ratings following the previously announced deal with Citigroup. The Positive Rating Watch reflects Fitch's expectation that Wachovia's ratings will be aligned with those of WFC's at closing.

Wells Fargo will offer in a fixed exchange ratio 0.1991 Wells Fargo shares for each Wachovia share, valuing Wachovia Corporation at approximately $15.1 billion. Wells Fargo plans to raise up to $20 billion in equity which is expected to be mostly in the form of common stock. However, due to the size of the transaction WFC's capital levels will fall below current levels. Through previous preferred issuances, WFC had been building its capital levels in anticipation of acquisition opportunities. WFC's historically strong earnings and equity generation rates should enable the combined company to rebuild capital over time. The transaction is expected to close on or before Dec. 31, 2008 and is subject to approval by Wachovia shareholders and regulators. While regulators have yet to opine on this transaction, Fitch does not currently see any reason why this transaction would not receive regulatory approval.

WFC expects to record $10 billion in merger and integration charges and expects to record $5 billion annual expense reduction through synergies.

Fitch has affirmed the following ratings:

Wells Fargo & Co.

—Long-term IDR at 'AA';

—Senior debt at 'AA';

—Short-term IDR at 'F1+';

—Short-term debt at 'F1+'.

—Subordinated debt at 'AA-';

—Preferred at 'AA-';

—Individual at 'A/B';

—Support at '5';

—Support Floor at 'NF'.

Wells Fargo Bank, NA

—Long-term IDR at 'AA';

—Long-term deposits at 'AA+';

—Short-term IDR at 'F1+';

—Short-term deposits at 'F1+';

—Short-term debt at 'F1+'.

—Subordinated debt at 'AA-';

—Individual at 'A/B';

—Support at '2';

—Support Floor at 'BBB-'.

Wells Fargo Bank Northwest, NA

—Long-term IDR at 'AA';

—Long-term deposits at 'AA+';

—Senior debt at 'AA'.

—Short-term IDR at 'F1+';

—Short-term deposits at 'F1+';

—Individual at 'A/B';

—Support at '2';

—Support Floor at 'BBB-'.

Wells Fargo Financial, Inc.

—Long-term IDR at 'AA';

—Senior debt at 'AA'.

Wells Fargo Capital II

Wells Fargo Capital Trust IV, VII, VIII, X, XI, XIV

InterWest Capital Trust I

—Preferred at 'AA-'.

Wells Fargo Financial Canada Corp.

—Long-term IDR at 'AA';

—Short-term IDR at 'F1+';

—Senior debt at 'AA';

—Short-term debt at 'F1+'.

WFC Holdings Corp.

—Subordinated debt at 'AA-'.

Greater Bay Bank, NA

—Individual Rating at 'A/B';

—Long-term IDR at 'AA';

—Short-term IDR at 'F1+';

—Support at '2';

—Support Floor at 'BBB-';

—Long-term deposits at 'AA+';

—Short-term deposits at 'F1+'.

Greater Bay Bancorp, Inc.

—Senior debt at 'AA'.

Fitch has also taken the following rating actions on Wachovia and subsidiaries:

Wachovia Corporation

—Long-term IDR upgraded to 'A+' from 'BB-' and placed on Rating Watch Positive;

—Short-term IDR upgraded to 'F2' from 'B' and placed on Rating Watch Positive;

—Short-term debt upgraded to 'F2' from 'B' and placed on Rating Watch Positive;

—Senior long-term debt, rated 'A+', placed on Rating Watch Positive;

—Subordinated debt, rated 'A', placed on Rating Watch Positive;

—Preferred stock upgraded to 'A-' from 'B+' from and placed on Rating Watch Positive;

—Individual upgraded to 'C' from 'D' and placed on Rating Watch Positive;

—Support remains at '5';

—Support Floor remains at 'NF'.

Wachovia Bank, NA

—Long-term IDR, rated 'A+', placed on Rating Watch Positive;

—Short-term IDR affirmed at 'F1+' and removed from Rating Watch Negative;

—Short-term deposits affirmed at 'F1+' and removed from Rating Watch Negative;

—Long-term deposits, rated 'AA-', placed on Rating Watch Positive;

—Senior long-term debt, rated 'A+', placed on Rating Watch Positive;

—Subordinated debt, rated 'A', placed on Rating Watch Positive;

—Individual, rated 'B', placed on Rating Watch Positive;

—Support remains at '2';

—Support Floor remains at 'BBB-'.

Wachovia Bank of Delaware, NA

—Long-term IDR 'A+', placed on Rating Watch Positive;

—Short-term IDR affirmed at 'F1+' and removed from Rating Watch Negative;

—Individual, rated 'B', placed on Rating Watch Positive;

—Support remains at '2';

—Support Floor remains at 'BBB-'.

Wachovia Mortgage, FSB

—Long-term IDR, rated 'A+', placed on Rating Watch Positive;

—Short-term IDR affirmed at 'F1+' and removed from Rating Watch Negative;

—Short-term deposits affirmed at 'F1+' and removed Rating Watch Negative;

—Long-term deposits, rated 'AA-', placed on Rating Watch Positive;

—Senior long-term debt, rated 'A+', placed on Rating Watch Positive;

—Individual, rated 'B', placed on Rating Watch Positive;

—Support remains at '2';

—Support Floor remains at 'BBB-'.

Wachovia Bank, FSB (Texas)

—Long-term IDR, rated 'A+', placed on Rating Watch Positive;

—Short-term IDR affirmed at 'F1+' and removed from Rating Watch Negative;

—Short-term deposits affirmed at 'F1+' and removed from Rating Watch Negative;

—Long-term deposits, rated 'AA-', placed on Rating Watch Positive;

—Individual, rated 'B', placed on Rating Watch Positive;

—Support remains at '2';

—Support Floor remains at 'BBB-'.

Wachovia Capital Finance Corporation (Canada)

(guaranteed by Wachovia Bank, NA)

—Short-term IDR affirmed at 'F1+' and removed from Rating Watch Negative.

Congress Financial Capital Company

(guaranteed by Wachovia Corporation)

—Long-term IDR, rated 'A+', placed on Rating Watch Positive;

—Senior long-term debt, rated 'A+', placed on Rating Watch Positive.

Golden West Financial Corporation

—Senior long-term debt, rated 'A+', placed on Rating Watch Positive.

SouthTrust Bank

—Senior long-term debt, rated 'A+', placed on Rating Watch Positive;

—Subordinated debt, rated 'A', placed on Rating Watch Positive.

First Union National - Florida

SouthTrust Corporation

Western Financial Bank

—Subordinated debt, rated 'A', placed on Rating Watch Positive.

Wachovia Capital Trust I, II, III, IV, V, IX

Central Fidelity Capital Trust I

Corestates Capital I, II, III

First Union Capital I, II

First Union Institutional Capital I, II

—Preferred, rated 'A', placed on Rating Watch Positive.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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