Wells Fargo mum on stress tests, lauds regulation
SAN FRANCISCO (Reuters) - Wells Fargo & Co said it is strongly capitalized despite speculation it may need more funds following completion of the Federal Reserve's stress tests of major U.S. banks.
Executives at the No. 4 U.S. bank, one of 19 large lenders undergoing government "stress tests" to gauge their ability to weather a deep recession, would not talk about the Fed's findings, which could be unveiled as soon as next week.
Chief Executive John Stumpf backed moves on Tuesday by regulators to tighten supervision over the world's largest financial services industry to avoid systemic risk, saying any company that "plays" in that sector should be subject to supervision.
"If you come into the pool, everybody has to be wearing a swimsuit," Stump told shareholders at an annual meeting when asked about government efforts to step up surveillance in the embattled financial services arena.
Stumpf's comments set him slightly apart from some of his peers, including Bank of New York Mellon Corp CEO Robert Kelly, who said on Monday there were too many regulators watching over U.S. companies.
The fourth-largest U.S. bank by assets, which this month posted a record first-quarter profit, Wells Fargo took $25 billion of capital from the government's Troubled Asset Relief Program last fall.
Deutsche Bank analyst Matt O'Conner wrote in a note to clients on Monday that Wells Fargo, along with Bank of America and eight other U.S. lenders, may need to raise more capital based on his own approximation of a stress test of the banks' tangible common equity to risk-adjusted assets.
Stock in Wells Fargo -- in which Warren Buffett's Berkshire Hathaway Inc is the largest shareholder -- climbed nearly 1 percent in after-hours trade, after sliding more than 4 percent in the regular session to close at $19.48.
NOT A LITMUS TEST
Last week, the Federal Reserve said its tests were aimed at ensuring adequate capital in reserve so that major banks could continue to lend in potentially bleaker conditions, and were not a measure of banks' solvency.
The 19 banks tested are estimated to hold two-thirds of the assets and more than half of the loans in the U.S. banking system.
On December 31, Wells Fargo bought Wachovia Corp for $12.5 billion, and immediately wrote down $37.2 billion of riskier Wachovia loans.
It said last week it did not expect another writedown on that portfolio, and that its $22.85 billion reserve will cover 12 months of consumer losses and at least 24 months of commercial and commercial real estate losses.
While Wells Fargo said at the time it accepted TARP money that it did not need the funds, its capital ratios were now lower than those of many rivals.
Wells Fargo's Tier-1 capital ratio, including the $25 billion, ended March at 8.28 percent, above the 6 percent regulatory minimum but below the double-digit ratios that many rivals maintained.
Its ratio of tangible common equity to tangible assets was 3.28 percent; many analysts prefer to see 5 percent.
On Tuesday, just about 30 percent of the vote came out in favor of a proposal for the bank to appoint an independent director as chairman.
The current chairman, former chief executive Richard Kovacevich, had stayed on past the bank's standard retirement age of 65 to help oversee the integration of Wachovia.
(Reporting by Braden Reddall; Editing by Edwin Chan, Bernard Orr)
