Wells Fargo and Norwest announce pounds 21bn merger

TWO MORE US banks have announced plans to tie the knot, the fourth multi-billion-pound deal in the industry since April.

Wells Fargo, based in San Francisco, and Norwest Corporation, of Minneapolis, are to join forces in a $35bn (pounds 21bn) merger. The new bank, to be called Wells Fargo & Company, will be the US's seventh largest in terms of asset size and fourth largest in terms of market capitalisation.

News of the deal sent US stocks soaring in early trade. Wells Fargo was up $4.25 at $367.50, while Norwest was trading down $2.121/2 at $37.561/4.

Richard M Kovacevich, chairman and chief executive of Norwest and president and chief executive designate of the new company, said the merger would unite high-performing companies with complementary businesses, products, markets, technology and customers.

As with the recent tie-ups between NationsBank/BankAmerica and Banc One/First Chicago, the rationale for the deal was primarily cost-cutting, according to most analysts. The two banks hope to save at least $650m in costs a year by the third year after the merger.

The two banks yesterday tried to play down fears of job cuts, saying any lay-offs would be "minimal".

Analysts added that Norwest, seen as one of the industry's stars, could revitalise Wells Fargo, which has been beset by difficulties in recent years following its $11.3bn acquisition of First Interstate, the Los Angeles- based bank.

One analyst commented: "Norwest will try and rejuvenate a franchise which has been pretty beaten up."

The deal will be seen as yet another success story for Warren Buffett, the legendary billionaire investor, and a long-term shareholder in Wells Fargo.

Mr Buffett's most recent annual letter to shareholders in his Berkshire Hathaway investment vehicle revealed that the US investment guru held a 7.8 per cent stake in Wells Fargo at the end of 1997, slightly down from the 8 per cent stake he held at the end of 1996.

Ironically, Mr Buffett recently warned of the dangers of the consolidation wave currently sweeping through the US banking industry. Mr Buffett told shareholders at his company's recent annual general meeting: "I think when you get all through with this, you'll find that some of them are real hits and some of them are misses. They're very big and those aren't easy to do."

The Wells Fargo/Norwest merger - dubbed a "merger of equals" by the two banks - is the fourth in the US banking industry since April, when Travelers Group kicked off the latest round of merger fever with a $70bn tie-up with Citicorp.

The Wells Fargo deal will create a banking powerhouse with 90,000 employees, 20 million customers and $191bn assets under management. It will have the largest bank-owned insurance agency, be the US's leading commercial real estate lender and rank first in mortgage originations and servicing.

Paul Hazen, currently chairman and chief executive of Wells Fargo, will become chairman of the new bank.

Some analysts were sceptical about the prospects for the group in the short- to medium-term, citing the problems experienced by Wells Fargo when it successfully completed a $11.3bn hostile bid for First Interstate, a rival Californian bank.

The US Federal Reserve on Monday approved the merger of Union Bank of Switzerland and Swiss Bank Corp, creating the second largest bank in the world. The Fed said it had weighed criticism that the Swiss banks had not done enough to settle claims from heirs of Jewish Holocaust victims dating to World War Two but decided it did not warrant blocking the merger.

Recent US banking deals

April 7: Travelers Group and Citicorp announce $70bn merger.

April 14: BankAmerica and NationsBank say they are to join forces in $60bn deal.

Banc One and First Chicago NBD announce $30bn link-up.

April 22: Bank of New York launches $25bn bid for Mellon Bank. Bid is withdrawn one month later after Mellon rebuffs Bank of New York's approach.

June 8: Wells Fargo and Norwest announce $35bn deal.

News
Tommy Ramone performing at The Old Waldorf Nightclub in 1978 in San Francisco, California.
peopleDrummer was final surviving member of seminal punk band
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

Sport
The Mexico chief finally lets rip as his emotions get the better of him
world cup 2014
Sport
German supporters (left) and Argentina fans
Final gives England fans a choice between to old enemies
PROMOTED VIDEO
Voices
Spectators photograph the Tour de France riders as they make their way through the Yorkshire countryside
voicesHoward Jacobson: Line the streets for a cycling race? You might just as well watch a swarm of wasps
Life and Style
lifeHere's one answer to an inquisitive Reddit user's question
News
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
Sport
Yaya Touré has defended his posturing over his future at Manchester City
News
Detail of the dress made entirely of loom bands
news
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
beauty
Sport
There were mass celebrations across Argentina as the country's national team reached their first World Cup final for 24 years
transfersOne of the men to suffer cardiac arrest was 16 years old
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
News
A mugshot of Ian Watkins released by South Wales Police following his guilty pleas
peopleBandmates open up about abuse
Sport
Basketball superstar LeBron James gets into his stride for the Cleveland Cavaliers
sportNBA superstar announces decision to return to Cleveland Cavaliers
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Network Engineer (CCNA, CCNP, Linux, OSPF, BGP, Multicast, WAN)

£40000 per annum: Harrington Starr: Network Engineer (CCNA, CCNP, Linux, OSPF,...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice