Wells Fargo chairman: One more deal for the road?
NEW YORK (Reuters) - Some wonder whether Richard Kovacevich plans one more big merger before he rides the Wells Fargo & Co stagecoach into retirement.
Kovacevich will step down as chairman of the fifth-largest U.S. bank this year when he hits the mandatory retirement age of 65. While he passed the chief executive role in June 2007 to longtime colleague John Stumpf, Kovacevich remains as much the public champion of the San Francisco bank as his successor.
He has good reason. Unlike many large rivals, the $609 billion-asset, 160,500-employee Wells Fargo has suffered little from the nation's housing and credit crisis, despite being the second-largest U.S. mortgage lender.
And with the future of many banks very much up in the air this week with the financial landscape in turmoil, Wells Fargo shares this week hit a record high, and its market value now tops $131 billion. The bank is one of the largest investments of Warren Buffett's Berkshire Hathaway Inc.
"Two themes make Wells Fargo as good as it is," said Robert Millen, a portfolio manager at Jensen Investment Management in Portland, Oregon. "It has a very conservative credit culture, which kept it out of the subprime mortgage mess and instruments that took down other financial companies. Also, rather than try to be bigger to get better, it does it in reverse: it wants to get better, which in the end makes it bigger."
Wells Fargo has in recent years emphasized organic growth, while also making small purchases in the western two-thirds of the country, where it can get a 15 percent annual return rate.
Many suspect that could change, given a market value that trails only Bank of America Corp and JPMorgan Chase & Co among U.S. banks.
Wells Fargo was tipped as a possible bidder for the huge savings and loan Washington Mutual Inc, which has been battered by losses from mortgages, many of which Wells Fargo won't make itself. Both lenders declined to comment.
In a brief interview this week, Kovacevich said Wells Fargo was not the only bank looking to buy things right now.
"There's going to be a lot of mergers and acquisitions for either good reasons or because people don't have choices," he said. Kovacevich then admitted at a conference to being a "confessed serial acquirer," and that in eyeing targets that were "fixer-uppers," he felt like "a kid in a candy store."
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The 6-foot-3-inch (1.9-meter) native of Tacoma, Washington, could have been a professional baseball pitcher, having been courted by the New York Yankees. That idea was derailed when he tore his rotator cuff while attending Stanford University. Kovacevich went on to get three degrees from the school.
Kovacevich bolted from Citicorp in 1986 to Minneapolis' Norwest Corp, and became chief executive in 1993. In 1998, he moved to San Francisco after Norwest bought Wells Fargo for $31.7 billion and took its name.
At Wells Fargo, Kovacevich instilled a mantra of "cross-selling" products such as mortgages and credit cards to clients, now nearly six to each. Staff at the bank use advanced computer software to help decide which products customers might want based on their lifestyles, attitudes and risk tolerance.
Being able to sell more products was one reason the bank felt comfortable giving up market share by eschewing some risky home loans, such as option adjustable-rate mortgages that caused principal owed to rise even as home prices fell. Continued...
