At a Merrill Lynch banking conference in New York today, Wells Fargo Chief Executive John Stumpf told analysts that the worst was far from over.
Stumpf likened the current mortgage crisis to the Great Depression, but was quick to assure investors that the San Francisco-based bank and mortgage lender had little exposure to securities tied to bad loans.
The Wells Fargo chief said he has experienced three housing cycles, referring to the current one as “the worst I’ve seen,” and calling it the “steepest, fastest, most prolonged decline in residential real estate that we’ve seen in a very long time.”
“I don’t think we’re in the ninth inning of unwinding this. If we are, it’s an extra-inning game,” Stumpf said, opting to use a baseball reference.
“We have more down to go, but once we reach the bottom, the inventory is going to come off pretty quickly.”
He noted that the bank is not “immune from the economic environment,” but noted that it had “minimal” exposure to collateralized debt obligations and asset-backed securities, those which have plagued many other investment banks, leading to write-downs of more than $40 billion.
Anyone who has worked in the mortgage industry knows that Wells has always been a conservative player, opting to stay away from stuff like 100% financing and no-doc loans, so the bank should be better off than many in the field thanks to their prudence during a volatile few years.
Meanwhile, Warren Buffett increased his stake in Wells Fargo by 8.5 percent to 279.7 million shares, his second largest holding after Coca-Cola Co.
Wells Fargo is the second-largest U.S. mortgage lender and the fifth-largest bank.
Shares of Wells Fargo were down 69 cents, or 2.08%, to $32.56 in midday trading on Wall Street.