Not sure why this is a surprise.
Wells Fargo (WFC) CEO John Stumpf said in an interview with the Financial Times.
Stumpf quashed repeated speculation that Wells, the fifth largest US bank, would take advantage of the collapse in the shares of many rivals to clinch a large deal.
“A large transformational [deal] is highly unlikely. Not impossible, but highly unlikely,” Mr Stumpf said. “We don’t need to do a deal. Organic growth is the core growth engine in this company.”
Market talk has linked the San Francisco bank with a number of rivals including Wachovia and Washington Mutual.
Wells was seen as a buyer because, in spite of suffering $3bn in credit-related losses, it has a strong balance sheet and has remained profitable throughout the crisis.
Its share price has outperformed the sector and its market value is about equal to that of the much bigger Citigroup (C).
As the only US bank with a top-notch triple A credit rating, Wells would also be able to borrow funds at advantageous rates.
Mr Stumpf noted that since the 1998 merger between Norwest and Wells Fargo, the group had eschewed large acquisitions, preferring to focus on bolt-on purchases of companies in the western states.
“We come from a culture where bigger is not better. You get bigger by being better, you don’t get better by being bigger,” he said, adding that Wells was also unlikely to stray from its western focus by buying on the East Coast.
Did anyone really think the WFC was going to go dumpster diving for Wachovia (WB) or Washington Mutual (WM)? Really?
Let’s look at the last big deal WFC did a decade ago now when it merged with Norwest. The merger at the time was considered a “merger of equals” in the press release.
At the time WFC CEO Richard Kovacevich said, “This merger of equals will bring together two high performing companies with complementary businesses, products, technology, markets and customers,” said Kovacevich. “It will be a leading franchise in the western United States with all the resources necessary to meet all of our customers’ financial needs and serve them when, where and how they want to be served.”
At the time, WFC shareholders, after the merger owned 52.5% of the new company and Norwest holders owned 47.5%.
I can’t imagine how anyone in their right mind would consider a WFC purchase of either the rumored banks above would garner even the most remote similarity. Could they? What would WFC give WaMu shareholders in a deal? Free checking?
As a matter of fact, can anyone find a WFC deal in which they bought desperate operations? I can’t and that is probably the reason they are not in the same boat as other banks now.
It is kind of like sitting here wondering what tech company Berkshire Hathaway’s (BRK.A) Warren Buffett will buy, he won’t and WFC doesn’t do bad deals.
Disclosure (“none” means no position):Long WFC, WB,C, none
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