Bloomberg News

Stumpf Says Economy Improves as Some Housing Markets Strengthen

June 03, 2011

(Updates with financial performance and additional CEO comments, starting in the fifth paragraph.)

June 3 (Bloomberg) -- Wells Fargo & Co. Chief Executive Officer John Stumpf, manager of the biggest U.S. home lender, said the economy is improving and that he sees signs of a turnaround in some housing markets.

While energy costs are a challenge, home prices in some regions have found a bottom, Stumpf told investors today during a conference sponsored by Sanford C. Bernstein & Co. Stumpf spoke less than an hour after the latest data on U.S. labor markets showed employers added the fewest number of workers in eight months and unemployment unexpectedly rose to 9.1 percent.

Jobs are the main ingredient in determining whether homeowners keep up with their loans, Stumpf said, adding that overdue payments have been declining.

“American pay their bills if they have jobs,” he said during a discussion about home-equity loans. As for purchases, homes in some cases are cheaper to buy than to rent, he said.

Wells Fargo made a $3.76 billion first-quarter profit, a 48 percent gain on the same period in 2010. The San Francisco-based lender’s mortgage-banking income declined 18 percent from a year earlier as originations fell.

Credit Quality

The bank posted a $1 billion pretax gain due to stronger credit quality as it cut provisions for future losses on bad loans. Credit quality will continue to improve even “if the economy goes sideways,” Stumpf said.

Stumpf, who replaced Richard Kovacevich as CEO in 2007, said that financial industry regulations represented a “new normal” which have cost the bank income. Wells Fargo’s revenue fell 5.8 percent in the first quarter to $20.3 billion. The regulations were brought on by a slump in the economy and banks themselves, Stumpf said.

Wells Fargo faces an erosion of fees from overdrafts as well as a potential loss of income from debit cards due to federal regulations. Stumpf said he was optimistic the bank could replace some of the lost revenue.

--With assistance from Dakin Campbell in San Francisco. Editors: Rick Green, Dan Kraut

To contact the reporter on this story: Donal Griffin in New York at dgriffin10@bloomberg.net

To contact the editor responsible for this story: Rick Green at rgreen18@bloomberg.net


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