Wells Chairman Sees Growing Opportunities

Richard M. Kovacevich gave his outlook at the Bank of America 37th Annual Investment Conference Wednesday in San Francisco.

“Because of our responsible lending and risk management practices, we have not faced many of the issues others have in the mortgage industry,” he said.

Kovacevich, who recently relinquished his role of president to John G. Stumpf, explained Wells retained no nonprime limited documentation products in its portfolio, didn’t originate negative amortization loans and maintained minimal adjustable-rate mortgage reset risk in its portfolio.

“We didn’t believe the product was appropriate — especially for subprime borrowers, ” he said. “Wells Fargo Bank is the only bank in the United States, and one of only two banks worldwide, to have the highest credit rating possible from both Moody’s and Standard & Poor’s.”

In addition, diversified financial product lines helped them to weather the tough times in mortgage lending — with mortgage-related earnings accounting for less than 20 percent of overall earnings.

The San Francisco-based company said California continues to be its fastest growing market.

Residential loans on its balance sheet were $134 billion on June 30, including $22 billion in debt consolidation loans, $81 billion in home equity loans and $31 billion in ARMs.

“Spreads have widened,” Kovacevich added. “Still, quite frankly, as much as they’ve widened, you should understand they’re still below the long term average and amongst all asset classes so we actually think they got a ways to go.”

Noting that required risk-reward levels have improved on assets, he said “We look forward to the opportunities that actually have come our way in the past few weeks and we hope continue to come our way.”

“We have over 80 businesses,” Kovacevich continued. “We will acquire companies in those business that meet our financial and cultural compatibility criteria.”

He said the acquisition of Greater Bay Bancorp., which operates in Northern California, is expected to close early in the fourth quarter.

“Our disciplined approach to risk management, our strong capital ratios, our industry leading credit ratings, our liquidity and the diversity of our earnings will enable us to continue to take advantage of attractive opportunities, particularly as a result of the recent turmoil in the credit markets,” he concluded.

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: mtgsam@aol.com