Wells Fargo & Co. (WFC), the biggest U.S. home lender, is “optimistic” about prospects for raising the company’s dividend, according to Chief Financial Officer Tim Sloan.
The bank is likely to seek approval from regulators for an increase and will continue buying back shares, Sloan said today at an investor presentation in Boston.
Chief Executive Officer John Stumpf boosted the quarterly payout to 12 cents earlier this year, restoring part of the cut imposed during the financial crisis, and announced the bank would repurchase 200 million shares. The dividend was slashed to 5 cents from 34 cents in May 2009. Regulators rejected requests for increases from rivals including Bank of America Corp. (BAC)
“We look forward to the process, we’ve got a great story to tell,” Sloan said. “Our expectation is we’re going to recommend an increase in our dividend and continue to repurchase more shares and continue to return more capital to shareholders.”
Added federal scrutiny of home-equity loans shouldn’t cause a problem for the industry and San Francisco-based Wells Fargo is appropriately reserved, Sloan said. Regulators are examining whether the nation’s home lenders have accurately valued $845 billion of home-equity and other second-lien mortgages, people familiar with the matter said in September.
“It’s really prudent for the regulators to look at reserving practices across all product types,” Sloan said. Investors have speculated that weak housing prices have eroded the collateral backing home-equity loans, and Sloan said the debt “from a regulatory standpoint, could cause concern.”
While home prices have dropped, consumers tend to keep paying even if their loan is underwater, he said. The main driver of defaults is job loss, Sloan said.
Wells Fargo is looking to buy assets from European banks trying to raise capital as the continent’s sovereign debt crisis continues to roil markets, Sloan said. The bank yesterday announced it agreed to buy a portfolio of U.S. loans from Irish Bank Resolution Corp., formerly known as Anglo Irish Bank Corp., the nationalized lender.
“There’s a lot of opportunity out there,” Sloan said. “Many of the European banks, to meet the capital levels that they need to meet, are going to have to shrink a bit and they’re going to look at some of the assets and operations that they have in the U.S. and shrink those and likely sell some.”
Wells Fargo dropped 0.5 percent to $25.30 at 10:13 a.m. in New York, bringing the decline for this year to 19 percent.
To contact the reporter on this story: Donal Griffin in New York at firstname.lastname@example.org