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On the Call: Wells Fargo CEO John Stumpf


Wells Fargo on Friday reported higher net income and revenue for the second quarter, thanks largely to home loans. Mortgage sales doubled, and a record amount of mortgage applications flooded in.

But analyst Mike Mayo questioned whether the bank was too dependent on one business. In a conference call with the bank's executives and analysts, he asked if Wells Fargo's cost-cutting would provide enough of a safety net when mortgages did slow down. CEO John Stumpf said the bank is sufficiently diversified to survive a mortgage decline, and he referenced Wells Fargo's trademark stage coach for illustration.

MIKE MAYO: "If and when mortgage slows, what fills that bucket? What replaces that? Could there be an 'oh no' quarter where mortgage slows and you haven't cut the expenses yet?"

WELLS FARGO CHIEF FINANCIAL OFFICER TIM SLOAN: "Well, Mike, we could always have an 'oh no' quarter. This is a volatile business that we are in, for sure. ... I would just point to the fact that ... while we have (recorded) 10 consecutive quarters of earnings growth, we have had ups and downs in the mortgage business. I think what that reflects is the benefit of the fact that we have got a very diversified business model. The mortgage business is important to us; but when you look at the percentage of mortgage revenues for last year and the year before, it goes down because we are growing the rest of the business quite nicely."

WELLS FARGO CEO JOHN STUMPF: "We always say there are lots of different horses pulling this coach; and one pulls harder when the other one doesn't pull as hard. So that is the beauty of this balanced business model. But I will tell you one thing, Mike, we will not stretch for something. I mean, it is just not in our culture to do that. So if we happen to have something that goes down one quarter, that is life."

MAYO: "And what if you are not pulling as much in the coach? What about eliminating a couple horses, to stretch the analogy?"

STUMPF: "We are trimming manes all the time."


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