Much of the IT integration work still lies ahead in the closely watched acquisition.
One early success in merging the Wells Fargo-Wachovia IT systems was getting mortgage employees on a single platform in time to rake in this year's refinancing boom, says the executive leading the technology integration for the combined companies.
Other victories include combining payment systems so Wachovia branches could accept payments from those new Wells Fargo mortgage customers, and allowing customers to use the combined ATM network, says Martin Davis, head of the Technology Integration Office and previously CIO for Wachovia.
Still, most of the technical integration work lies ahead for one of the most closely watched acquisitions in the banking industry. "We've got the planning laid out, we know how we're going to do the integration, and now executing flawlessly is the most significant challenge," Davis says. "We know we can get the work done, but we want to make sure we minimize any impact to our customer base."
Wells Fargo agreed to buy Wachovia for $15 billion in October, when Wachovia was on the brink of collapse. Wednesday, Wells Fargo announced second quarter results with revenue of $22.5 billion, up 28% from the first quarter, and net income rising to $3.17 billion. Yet investors still drove the stock down, as analysts worried about the bad loans in its portfolio, which grew to $18.3 billion, or 2.2% of its total loans.
The U.S. banking sector is in the midst of major change as fallout from last fall's banking crisis. The Wells Fargo-Wachovia deal will create a 10,000-branch, 12,000-ATM operation, linking Wells' West Coast franchise with Wachovia's East Coast presence. Meanwhile, JPMorgan Chase expects to have fully integrated the retail banking assets of Washington Mutual by year's end, while at the same time bringing on the investment bank Bear Stearns.
Anyone who's been through such IT integrations knows they're tough, in part because it means picking one software system and killing off another. "It can be emotional," Davis says. "[IT pros often] tie their value and worth to the organization to the system they support. We constantly remind our team members the value of a technology professional is the experience and knowledge you bring around technology, not necessarily tied to a particular system." Davis declined to put a number on the IT layoffs resulting from the acquisition, but says they've been minimized in part by reducing local contractors and offshore activity.
Wells Fargo's IT integration strategy starts with the assumption that it'll keep the Wells system, unless there's a clear performance advantage, such as using Wachovia's brokerage platform. There's also the option of bringing in a new software platform that's better than either company has, but the team resists that. "We select system A or B, and we challenge if someone tries to bring in option C," Davis says.
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