The lender is “sub-optimized” in wealth management, as it has a smaller market share than in its overall deposit base, Stumpf, 57, said today at a Goldman Sachs Group Inc. investor conference in New York.
“We’re adding people there, and if there were the right opportunity at the right time, that could be interesting to us,” Stumpf said.
Wells Fargo, which has $1.3 trillion in client assets, is the third-largest among the so-called wirehouse brokerages, trailing only Morgan Stanley Smith Barney and Bank of America Corp.’s Merrill Lynch. Wells Fargo’s wealth, brokerage and retirement unit accounted for 6.9 percent of the San Francisco- based bank’s profit in the third quarter.
Increasing the size of the brokerage and retirement unit may contribute to Stumpf’s goal of improving cross-selling, or offering more products to existing clients. The average Wells Fargo brokerage client had almost 10 products from the lender, according to a presentation accompanying Stumpf’s remarks.
Wells Fargo may also look at an acquisition that will allow it to distribute insurance products to its lending customers, Stumpf said.
“We have a lot of opportunities to distribute insurance,” he said. “I’m not talking about the manufacturing side, but I like the distribution side a lot.”
Limits on Growth
Wells Fargo may be limited in the acquisitions it can complete because it controls “a little over” the regulatory maximum of 10 percent of U.S. deposits, Stumpf said.
Wells Fargo has completed 58 acquisitions in the past five years, led by its $12.7 billion purchase of Wachovia Corp. during the depths of the financial crisis, according to data compiled by Bloomberg.
The lender’s shares fell 27 cents, or 1 percent, to $28.47 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have risen 5.5 percent this year.
In October, Wells Fargo reported record third-quarter profit that beat most analysts’ estimates. The lender released $650 million of loan-loss reserves in the quarter as net charge- offs fell from the second quarter.
Stumpf said he likes his bank’s position on mortgage- repurchase demands because private-label securities make up only 8 percent of the lender’s servicing portfolio and many of the subprime loans are already on Wells Fargo’s balance sheet. The lender reduced its reserve for repurchases and reported $414 million in losses in the third quarter.
The Federal Reserve issued guidelines last month on how it will decide whether large U.S. banks may increase dividends and buy back shares, requiring the lenders to submit to stress tests of capital levels. Wells Fargo is likely to be among the first banks to raise its dividend, analysts including Portales Partners LLC’s Jennifer Thompson have said.
“Shareholders have been very patient and it’s high time that we provide a return on your investment,” Stumpf said. “I’m in violent agreement that it’s time that we get back toward a more normal basis, whatever that means.”
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