Is Wells Fargo on the Prowl?

You can't tell by the share price -- it's down nearly 20% so far in 2008 -- but Wells Fargo (NYSE: WFC  ) is weathering the financial crisis quite well. You can get a clear indication of Wells' comparatively strong stance by looking at the share movements of archrivals such as Citigroup (NYSE: C  ) and Bank of America (NYSE: BAC  ) , which have fallen more than twice as much as Wells has this year, as a result of much higher levels of subprime exposure and riskier lending practices that are coming home to roost.

JPMorgan Chase (NYSE: JPM  ) has fallen about 20% year to date, too, and finds itself in a similar position to Wells. Both Jamie Dimon and John Stumpf, the respective CEOs of JPMorgan and Wells Fargo, found the risk/reward trade-off of the mortgage business to be less than ideal. They were, therefore, a select minority in a sea of peers who tripped over each other to originate and securitize mortgages and take advantage of the frenzied pace of housing-price appreciation and turnover.

The rest is history, and Dimon has already used his superior balance-sheet positioning to purchase rival Bear Stearns. Speculation abounds that he's on the prowl for other opportunities as well, with embattled Washington Mutual (NYSE: WM  ) and Wachovia (NYSE: WB  ) frequently cited as prime buyout candidates.

But what about Wells Fargo? It must surely be planning to snap up rivals on the cheap to build its market share, right?

Well, sort of. In a recent interview, Stumpf expressed an interest in acquiring additional insurance-distribution capabilities or a wealth-management provider -- a notion that brings Northern Trust (Nasdaq: NTRS  ) to mind, though its share price rarely falls to the bargain-basement levels. Stumpf also mentioned a focus toward bolt-on acquisitions in the core Western market, rather than trying to score a megadeal to get bigger in a hurry.

Though not overly newsworthy, this proclamation should come as no surprise to shareholders, who have become accustomed to Wells Fargo's preference for more predictable organic growth and a continued focus on cross-selling a number of financial products to its loyal customer base. Sticking to its knitting has served Wells Fargo well, and the stock price direction should eventually return to reflect the appealing long-term fundamentals of the business it's based on.

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Fool contributor Ryan Fuhrmann is long shares of Wells Fargo but has no financial interest in any other company mentioned. Feel free to email him with feedback or to further discuss any companies mentioned here. The Fool has an ironclad disclosure policy.


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  • Report this Comment On August 26, 2008, at 6:10 PM, rodby wrote:

    I own a few thousand shares of WFC, and I think they are positioned to be able to take over banks when Congress introduces the Son of Resolution Trust.

    Other than that, if they decide to buy something big, I am selling.

    Stumpf and his boss built this bank buy buying small community banks, and in my opinion the strong consumer franchise is what allows them to limit exposure to the latest fad.

    With a franchise like Wells has, you don't need gimmicks to make your earnings targets.

  • Report this Comment On August 28, 2008, at 3:44 PM, Barbaralawgrace wrote:

    Congress needs to investigate and property owners need to be WARNED about mortgage lenders' practice of filing falsified IRS tax form 1099-A's or 1099-C's. To illustrate, here is a portion of my statement concerning Wells Fargo's false 1099-A, as well as a link to entire

    actual statement posted at:

    http://www.lawgrace.org/2008/08/08/my-august-8-2008-statemen...

    =============================

    (Also, facts and evidence show that just as mortgage giant Countrywide

    is now under federal investigation, so should be Wells Fargo.) This Financial Office mistakenly thought a complaint was filed concerning my property; and on July 30, 2008, Ms. Kathy Drzewiecki

    sent a responsive letter on Wells Fargo's behalf. . . .As your records

    show, GE Capital Mortgage Services, Inc., became defunct in year 2002

    when it merged into GE Mortgage Services, LLC, its "successor."

    Therefore, it is impossible for foreclosure auction to have LAWFULLY been carried out in year 2005 on behalf of the non-existent GE Capital Mortgage Services, Inc. Also, contrary to what Ms. Drzwiecki wrote, it is NOT POSSIBLE in year 2005 for Wells Fargo to continue being the "mortgage servicer" for non-existent GE Capital Mortgage Services. Furthermore, if my property was (impossibly) ACQUIRED by GE Capital on May 19, 2005, there is NO LAWFUL REASON for the IRS form 1099-A to exhibit Wells Fargo's name.

    Another thing Ms. Drzewiecki's letter failed to state is that I initially acquired my residence property in 1993 through AmSouth Bank. For home improvement in 1999, I refinanced it with GE Capital. I had equity in the property, and I never had a subprime loan. (Marriage failure caused me financial ruin; and crooked deals in Family Court sealed my fate.)

    On the other hand, facts overwhelmingly demonstrate that, using defunct GE Capital's identity, debt collector attorney Herschel C. Adcock, Jr., fraudulently seized and acquired more than $80,000 when he flipped my property. Also, contrary to the form 1099-A, the Fair

    Market Value was not $12,000 -as manifest from the year 2005 sale price for which that property was sold in that same tax year purportedly to a third party.

    A lot of displaced foreclosed former property owners will one day

    discover there is a 1099-A or a 1099-C for which the IRS wants answers! If that 1099 is replete with false information, there could be severe tax effects and a lot of needless untangling to be burdened

    with.

    Across the country, foreclosures have been halted because "real party

    interest" was absent from those foreclosure proceedings. Yet, in

    Louisiana, it would not be farfetched for foreclosures to become filed in the name of 'Mary had a little lamb', and judges allow peoples' homes to become seized.

    -Barbara Ann Jackson (Katrina-displaced from New Orleans)

    http://www.lawgrace.org

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