George S. May Business Blog

Yesterday, just hours after Citigroup Inc. announced their plans to repay the $20 billion they owed in taxpayer funds, Wells Fargo made an interesting move; they did the same. Wells Fargo made the announcement just after Wall Street’s closing bell that the bank will sell $10.4 billion in stock as a means of gathering the full $25 billion that it received in government aid last fall. Many speculate that the timing of the announcement came in response to Citigroup’s plans, however Wells Fargo is denying any sort of correlation. 

“We’ve said for quite some time that we wanted to repay at the appropriate time,” said a Wells Fargo spokeswoman.

The move will likely give Wells Fargo executives a collective sigh of relief as the bank no longer will have to abide by the government’s newly enforced pay restrictions and close oversight that came with the bailout program. The company said it paid $1.4 billion in dividends to the government under the terms of its agreement. While Wells Fargo will lose about $2 billion in fourth quarter income at the hands of this payback plan they, in turn, will save $1.25 billion a year in preferred stock dividends.

Wells Fargo also said that by awarding stock in place of some of the cash it had planned to use for bonuses and by issuing its stock to company benefit plans they will be able to come up with $1.35 billion. Wells Fargo also plans to sell $1.5 billion in assets by the end of next year or raise more capital.

After Wells Fargo’s announcement, its shares rose 56 cents, or 2.2 percent, to $26.05 in after-hours electronic trading. The stock ended regular trading at $25.49, a gain of 8 cents.