John Stumpf's words are immortalized forever on the Internet, he bragged how he "dreams of checking accounts in his sleep" so to push workers to cross-sell extra financial products to unsusptecting customers because it made the bank a lot of money. Checking accounts he said were the gateway to sell credit cards, loans, savings, mortgages and a host of other banking products.
credit:
https://www.bizjournals.com/charlotte/blog/bank_notes/2014/10/i-dream-of-checking-john-stumpf-talks-deposits-and.html
By Adam O'Daniel – Finance Editor, Charlotte Business Journal
Oct 14, 2014, 2:57pm EDT Updated Oct 14, 2014, 12:23pm
Despite the restlessness on Wall Street, John Stumpf says he’s still dreaming about checking accounts and "magical" mortgages.
The CEO of Wells Fargo & Co. this morning told analysts that the San Francisco-based bank will continue to celebrate its massive deposit-gathering franchise, even though it can’t lend the money out as fast as it’s coming in. Stumpf, as he has for years, says earning customers’ primary checking and savings accounts leads to more business such as small-business loans, car loans, home loans, credit cards and investment vehicles.
Analysts often question Stumpf on the matter because the strategy in recent quarters has put pressure on the bank’s all-important net-interest margin, the difference between how much the bank charges in loan interest and what it pays to its depositors. The margin dipped to 3.06% in the third quarter, down from 3.39% a year ago, as interest rates remained extremely low and loan demand didn't keep pace with savings rates.
Still, Wells Fargo, which has 22,000 Charlotte employees, reported net income of $5.7 billion in the latest period, up from $5.6 billion for the same period a year ago. It marks the 17th consecutive year-over-year improvement in quarterly earnings, The Wall Street Journal reports.
The results were bolstered by better revenue across most business lines, improving credit quality, lower taxes and larger venture capital gains, despite higher operating costs and a sluggish mortgage market.
Stumpf this morning discussed the results, his outlook, his checking-account dreams and why he loves the mortgage business. Following are edited excerpts.
On checking accounts:
I'm going to bed earlier these days so I can even dream longer about them. I still just love checking, and here's why: First of all, when an account comes — like we grew net primary checking accounts 4.9% on the consumer side and 5.6% on the business side — they don't come alone. They come with a relationship. And the increases you're seeing in debit card activity and credit card, we almost have 40% of our customers now who carry our credit card. That was 22% in 2009. And they do other things with us. So, no, the love affair has not ended. And we won't be in this environment forever, but if we can serve customers for a long time, that feels like forever, and we'd love that.
On the importance of mortgages:
A dollar spent on a home multiplies through the economy like no other thing that we do. I mean, a loan to a small business, we love it, to a large company. But a loan to a homeowner is magical in that respect. So every time we can serve another customer, good things happen.
On the U.S. economy:
While the path to a full economic recovery remains uneven, including the volatility we've seen recently, and the current low rate environment provides some challenges, I'm very optimistic about the future. The U.S. economy added 248,000 jobs last month, the 48th straight monthly employment gain, tying the record for the longest consecutive string of job gains ever. There are currently more job openings than at any time since early 2001. Household wealth is at an all-time high, and after years of paying down debt, the consumer debt burden is at the lowest level in over 30 years. Consumers are now better positioned for increased spending and borrowing.
The U.S. economy is also benefiting from the increase in domestic oil and gas production, which is at the highest level in almost 30 years and rising fast, up 14% over the past year. Fiscal conditions have improved at all levels of government, and government payrolls are once again on the rise for the first time this decade.
On the housing market:
Historically, most recoveries in this country have been led by housing. While the residential real estate market has definitely gotten better, which is good for the U.S. economy, it has not fully recovered. I believe there are several factors holding the housing market back from a complete recovery.
First, household formation is slower than it has been in the past. Second, national student debt balances have increased, leaving less money available to pay for a mortgage. Third, in some markets, inventory is not available, especially in coastal areas.
Finally, credit is still not attainable for all qualified borrowers due, in part, to the credit overlays that many mortgage lenders, including Wells Fargo, use to help reduce repurchase risk. Despite these challenges, our recent survey we conducted showed that homeownership is still an aspiration for 95% of respondents. Home prices are up 7% over the past year, and I believe the housing market will continue its recovery, driven by pent-up demand and affordability that, even with the increase in home prices, is still far better than the historical average. These trends are all positive for our country, our customers, our shareholders, as well as Wells Fargo, and we continue our service to the real economy.
On commercial banking:
If you look at more than just commercial customers broadly, there's actually been fairly good activity. Now there's been volatility lately in the market, but if you look at auto sales, and we participate in that business of course, August was the biggest sales month, maybe, in I don't know how many years. Consumers – our credit-card activities are increasing. We had growth in our mortgage portfolio. So it's really broad-based. And when I'm out calling customers, you know, corporate customers, our middle-market customers, there seems to be more – at least more discussion about activity in the marketplace. It is not totally ubiquitous. There's places that are stronger in energy for example, and those places are really doing well. I see and I hear more optimism than I heard a year ago.
On Wells Fargo’s improving credit:
Our credit performance continued to be excellent, with the net charge-off ratio declining to only 32 basis points on average loans on an annualized basis. We had a $300 million reserve release this quarter, down from $900 million a year ago. In fact, in my 32-plus years with the company, I've not seen credit better.
On ApplePay:
We are participating in that, and there are I think 7 million to 8 million terminals or merchants out in the marketplace and only a few hundred thousand have the NFC chip in them, and you need that, the Near Field Communications chip. So this will take – there will be an adoption, but we're pleased and excited on behalf of our customers to participate in that.