Wells Fargo Names Stumpf CEO; Kovacevich Remains Chair
Wells Fargo, the fifth-largest U.S. bank, named John Stumpf chief executive effective immediately, replacing Richard Kovacevich, who will remain chairman.
Stumpf, 53, has been president and chief operating officer since August 2005, and was long considered to be a leading candidate to replace Kovacevich. Last June, Stumpf joined Kovacevich as the only inside directors on the bank's board.
From his new post as head of Wells Fargo, the second-biggest mortgage lender in the U.S., Stumpf told CNBC on Wednesday that he doesn't see the economy facing a meltdown from housing or mortgage market problems.
"As long as customers have jobs--unemployment is still pretty low, we're still seeing wage growth and so forth--as long as those things are there, the fundamentals are there, those (companies that) did the business right I think are going to be fine," Stumpf said.
Kovacevich, 63, plans to remain with the San Francisco-based company no later than the end of 2008, when he will be 65. He became chief executive in November 1998, when his Norwest bought Wells Fargo and took its name, and became chairman in April 2001.
"The anointing of John Stumpf was long in the works," said Nancy Bush, managing member of NAB Research in Aiken, S.C. "It will be a very different style. Dick is very aggressive, while John is much more midwestern and low-key. John is a great conciliator."
A native of Pierz, Minn., Stumpf joined Norwest in 1982. Following the Wells Fargo merger, he became head of the southwestern banking group, which comprised Arizona, New Mexico and Texas. Two years later he became head of the larger western banking group, and in 2002 became head of community banking.
Wells Fargo ended March with $485.9 billion of assets and more than 3,200 branches in 23 U.S. states. It operates mainly in the western two-thirds of the United States.
Under Kovacevich, Wells Fargo more than doubled in size, despite eschewing giant mergers. It has generated the most consistent growth of any major U.S. commercial bank, boosting earnings per share by low double digits in most quarters.
The bank has also had one of the industry's highest lending margins despite the recent tough interest rate environment.
Wells Fargo is the second-largest U.S. mortgage lender.
In the first quarter, profit rose 11% to $2.24 billion, or 66 cents per share, on revenue of $9.44 billion. Wells Fargo trades at 11.6 times expected 2008 earnings, compared with multiples of around 9 or 10 times for larger rivals Citigroup, Bank of America, JPMorgan Chase and Wachovia.
Kovacevich and Stumpf have helped drive Wells Fargo's strategy of selling more products per customer, known as "cross-selling." The bank has sells an average of 5.3 products to each retail customer and six products to each business customer, compared with three each in 1998.
Kovacevich joined Norwest in 1986 from Citicorp, following disagreements over strategy with executives there.
The Washington native was once courted by the New York Yankees for his pitching ability before he attended Stanford University, and tore his rotator cuff.
Bush said Stumpf will need to focus on improving customer service. Wells Fargo is usually a laggard in bank customer satisfaction surveys by firms such as J.D. Power & Associates.
The analyst also called the timing of the announcement "very interesting," citing market speculation that Kovacevich might be seeking a different successor.
"The direction of Wells is very much set," Bush said. "The only thing that might change would he might be able to bring more mergers. You may see a kinder, gentler Wells."