At a May 31 conference, Bernstein's McDonald asked Stumpf whether the company was perhaps "getting too big." It also raises questions about Wells Fargo's status as a too-big-to-fail lender whose collapse could imperil the U.S. housing market, according to Mark Calabria, a director of financial regulation studies at the Cato Institute in Washington.
"The more concentrated anybody is in a specific market is worth watching," Calabria said in a phone interview. "This potentially increases the possibility that they are looked at as too big to fail. Were they to get into a lot of trouble the government would have to do something" to keep credit flowing to U.S. homebuyers, he said.
Too Good
Cole said Wells Fargo's history of avoiding many of the mortgage pitfalls that felled rivals earns them "the benefit of the doubt." In 2010, the Securities and Exchange Commission showed that Paulson & Co. had rejected subprime mortgage bonds from Wells Fargo when it was trying to find assets that the hedge fund could bet against because the quality of the underlying loans was too good. The bank hasn't posted an annual loss for at least a decade.
Wells Fargo is the most creditworthy of the large U.S. lenders, according to credit-default swap prices and its stock is up 17 percent over the last 12 months, outpacing all lenders in the KBW Bank Index except for U.S. Bancorp. Wells Fargo fell 0.8 percent to $30.75 as of 10:07 a.m. in New York trading.
Executives highlight the share they relinquished when firms such as Countrywide Financial Corp. offered cheaper pricing on loans with fewer document requirements and zero down payments. Heid pointed to the four-year period last month with a graphic titled "Industry leading market share." Three arrows pointed to the years of 2004 to 2007 on a bar chart with the note: "Market share forgone when industry didn't adhere to responsible lending principles."
Countrywide Fate
Countrywide was the largest U.S. mortgage lender as recently as 2007 before billions of dollars in soured loans prompted its sale to Bank of America Corp. Countrywide's losses have continued to plague the Charlotte, North Carolina-based lender, leading to more than $40 billion in losses and its retreat from the market. The bank held 4.2 percent of the market in the first quarter, according to Inside Mortgage Finance.
Wells Fargo is the only mortgage company with a top-5 ranking in originations and servicing each year since 1994, according to the bank.
"It will be harder for institutions to get by with a sizeable market share gain because regulators are watching these guys carefully," Rossi said. "I'm less concerned than I would be if we were back in the days when they had all these other products. It's the edgier stuff that got us all in trouble."
For now, Wells Fargo will continue to motivate salespeople to expand the business: another rally is scheduled for June 21.