Despite the hard times this market – and the banks in particular – have been seeing, Wells Fargo seems to be doing better than most.
CEO and President John Stumpf told Cramer today that while there’s plenty of stress on the industry right now, especially on the consumer side, Wells Fargo is still growing thanks to the bank’s capital strength, liquidity and operating model.
“There’s actually less competition,” Stumpf said. “People are inwardly focused trying to fix their balance sheets. We’re out trying to grow ours.”
“These are not necessarily bad times for us,” he continued. “We tend to outperform when times get tough.”
That’s why analysts shouldn’t doubt Wells’ recent dividend increase, the CEO said. Solid earnings, revenue and growth with a good loan-loss reserve “easily” support that increase.
Wells Fargo boosted the dividend to 34 cents a quarter from 31 cents, another $400 million in annual payouts. Stumpf doubted a company that brought in $8 billion last year would struggle to make those payments.
Stumpf also took the chance to respond to a recent analyst report – Meredith Whitney of Oppenheimer & Co. – that claimed a change in the way Wells reports bad home equity loans is making the company look in better shape than it actually is.
Wells changed the amount of time before the bank charges off defaulted home equity loans from 120 days to 180, the industry standard, Stumpf said, adding that it gives Wells more of a chance to work with its customers.
“So it was actually a customer advocacy,” he said, “not anything about the income statement.”
The rule left off about $268 million in charge-offs that otherwise would have been a part of the company’s second-quarter report. But Wells still took a $3 billion charge off, Stumpf said, half of that for bad loans and the other half to build loan-loss reserves.
“So it was in no way to anyway impact or minimize or some way overstate the earnings of the second quarter,” he said. “Just the opposite.”
Cramer called Wells Fargo “the best bank in America,” saying, “I think this one’s inexpensive” even though it’s selling at twice the book value.
Watch the video for CEO Stumpf’s explanation of his CDO and SIV exposure and how his bank is growing its balance sheet despite what looks like less core deposit growth.
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