Students from Seventh Street Elementary School pass by a stagecoach during… (Christina House, For The…)
If you want to do business with the biggest bank in the Western world, don't get on a plane to New York or London. The new place to go is sunny California.
Wells Fargo & Co., with its headquarters in downtown San Francisco, has shot ahead of the East Coast institutions that have long been the behemoths of the financial industry, including JPMorgan Chase & Co. andCitigroup Inc.
Although Wells Fargo still has fewer bank deposits than its closest competitor, its total stock market value is now about $178 billion — that's about $70 billion more than Citigroup and about $9 billion more than JPMorgan. It has even overtaken the largest bank in Europe, London's HSBC.
This newly assumed title is not just a quirk of the stock markets. It symbolizes an important shift that has taken place over the last year: Investors and bankers have increasingly lost faith in the old Wall Street model that helped New York consolidate its status as the financial capital of the world.
The new favorites in the banking industry are institutions that focus on the more straightforward business of taking in deposits and doling out loans. Wells Fargo is the only one of the four U.S. banks with more than a trillion dollars in assets that does not have a major Wall Street operation.
"A lot of the trading and Wall Street-type of revenues are just going to go away or become much lower," said Eric Oja, a bank analyst at Standard & Poor's. "Wells is already miles ahead in terms of that transition."
The bank has plenty to celebrate these days — on Monday its chief financial officer will ring the closing bell at the New York Stock Exchange to mark the company's 160th birthday this month. That comes a few days after the Federal Reserve announced that Wells Fargo stood up better than the nation's other mega-banks in stress tests.
Wells Fargo has zealously cultivated its image as a gigantic community bank. For instance, it has stuck with its iconic stagecoach logo instead of the geometric branding updates that others have tried. And the company has found an almost ideal personification in its chief executive, John Stumpf.
He grew up as one of 11 siblings on a dairy and poultry farm in rural Minnesota, where most of his family still lives. Although Stumpf now resides in San Francisco, where he walks to the office, he keeps the rounded vowels and homespun phrases of the Midwest and avoids the big displays of ego that have turned so many people off of Wall Street.
"I still know the price of milk, and the cost of commodities and education," Stumpf said in an interview with the Los Angeles Times.
Instead of talking about fast cars and fine wines, as is popular in East Coast circles, Stumpf is known for telling employees about his long power walks — during which he listens to the Bee Gees. He's even quick to hand out advice on how to prepare his family's gravy recipe.
"He spent an hour telling me exactly how to do it right, and then he followed up after Thanksgiving to make sure I did it right," said Lisa Stevens, head of Wells Fargo's retail operations in California.
The Wells approach seems to be working with customers. The bank regularly comes out ahead of its big peers in customer satisfaction surveys, and it is growing its loan portfolio at a time when many banks are cutting back.
Customers have responded, helping Wells Fargo overtakeBank of America Corp.in 2009 as the largest bank in California.
At a Wells branch in downtown Los Angeles, typist Jeanette Hall-Smith said she opened an account after having a bad experience with a bounced check at Bank of America.
"It's more of a warm atmosphere, and it's genuine to me. They take time out to really get to know a person," said Hall-Smith, 57. "I do have some mixed feelings because they're still strict when it comes to loans for individual people — they have a rigid criteria for people. So they're helping, but at a very slow pace."
Wells Fargo certainly has not avoided the scrutiny — or the fines and lawsuits — that have hit other big banks.
The company is the nation's largest servicer of mortgages and is paying
$5.3 billion as part of a nationwide settlement stemming from accusations that Wells Fargo and other big banks mishandled foreclosures — problems that were laid out in unflattering detail in a report from the Department of Housing and Urban Development's inspector general last week. Wells has also faced heat for introducing a $7 monthly fee for basic checking accounts in some states.
These problems come after the bank, like JPMorgan, received a $25-billion bailout through the government's Troubled Asset Relief Program. Wells repaid that money in 2009, but that hasn't halted criticism by the recent Occupy Wall Street movement.
For all his man-of-the-people demeanor, Stumpf has been the top-paid bank CEO, pulling down $19.8 million last year.
Protesters also showed up outside the home of the bank's chief financial officer, Tim Sloan, near Pasadena. Sloan thought it was unfair.