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Executive Producer
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Buffett tells Fortune's Adam Lashinsky that Wells didn't do "dumb things" just because all the other banks were doing them:
"Those guys have gone their own way. That doesn't mean that everything they've done has been right. But they've never felt compelled to do anything because other banks were doing it, and that's how banks get in trouble, when they say, 'Everybody else is doing it, why shouldn't I?'...
"In the end banking is a very good business unless you do dumb things. You get your money extraordinarily cheap and you don't have to do dumb things. But periodically banks do it, and they do it as a flock."
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Wells Fargo Chairman Richard Kovacevich |
"Wells just has a whole different attitude. That's why Kovacevich calls them retail stores. He doesn't even like the word banking. I mean, he is looking to have a maximum enduring relationship with many, many millions of people. Tens of millions. And at the base of it involves getting money in very cheap. When you do that that's a helluva start in the business. The difference between getting your money at 1-1/2% and 2-1/2% on a trillion-dollar asset base is $10 billion a year. It's hard to overemphasize that. He thinks more like (Wal-Mart founder) Sam Walton than he thinks like J.P. Morgan. I'm talking about the individual there. He's a retailer. He's not trying to influence Washington or be the most important guy on the scene or anything like that. He's just trying to do business with millions of people every day and make a few bucks off of them.
Lashinsky spoke by phone with Buffett on March 26 for a profile of the bank also running in the current issue. Buffett's Berkshire is the biggest shareholder of Wells Fargo, with almost seven percent of the outstanding stock.
As for the other banks in Berkshire Hathaway's portfolio, Buffett tells Fortune:
"We own stock in four banks: USB, Wells, M&T, and SunTrust. SunTrust I don't know about because South Florida is going to be the last to come back, and they've got a concentration down there. The other three, they're going to have a lousy year, but they'll come out of it with far more earnings power. The deposits are flowing in. The spreads are wide. It's a helluva good business."
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Why didn't Buffett include Bank of America when he told Fortune "We own stock in four banks: USB, Wells, M&T, and SunTrust." |
UPDATE: Warren Buffett Resolves the 'Mystery' of the 'Missing' Bank of America Stake.)
Buffett's comments on favorable spreads for the banks right now echo what he told us when he was live on CNBC last month. (See the WBW post: This Is Why Warren Buffett Says It's a "Great Time to Be in Banking")
Current stock prices:
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Berkshire Class A: [US;BRK.A
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Berkshire Class B: [US;BRK.B
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Wells Fargo: [WFC
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USB: [USB
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M&T: [MTB
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SunTrust: [STI
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Bank of America: [BAC
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Data is a real-time snapshot *Data is delayed at least 15 minutes