Despite slump, Norwest still trying to expand.

Norwest Mortgage is growing fast. In the past year alone it has increased its network of retail offices by 65%.

Some competitors and analysts say this is too fast. How, they ask, is Norwest going to feed this huge network of bricks and mortar at a time when total originations are shrinking fast?

The company has heard such talk before and is unconcerned. Its sometimes contrarian approach has been highly successful and it is not inclined to fix something that isn't broken.

Bucking the Trend

Smarting from a hedging debacle in the the mid-1980s, Norwest used a spiking interest rate market in 1987 to more than triple its branch network and become a top-10 lender. During the last two years, that strategy has really paid off and pushed Norwest close to the top.

And now that originations are in free fall, Norwest is continuing its aggressive expansion even while others close their doors.

As a result, it has the largest retail-branch network in the lending industry, with 5,000 employees in its retail division alone. Almost 3,000 people make up its retail sales staff at 707 branches in every state and the District of Columbia.

Analysts and Norwest's competitors have been predicting a setback for Norwest, especially after interest rates began climbing in February.

'Deliberate Expansion'

"Our strategy has been successful," said Mark Oman, president and chief executive. "I am not concerned about expanding too quickly as long as it is a deliberate expansion, and it is."

The subsidiary of Norwest Corp., Minneapolis, has shifted its branch-network expansion into warp speed. Norwest has opened 80 loan-origination shops this year alone.

"I don't think you have to fail just because you are big. Small companies fail too," said Peter J. Wissinger, executive vice president of Norwest Mortgage. "I would much rather be with a large organization."

Its branch network has helped it become the third-largest lender in America. Norwest originated $14 billion of loans in the first half of 1994, a 2% rise from the corresponding period last year. Retail originations accounted for $8 billion worth of loans. That at a lender that made $4.4 billion of loans just five years ago.

Mr. Oman clearly states that Norwest is hungry for more branch expansion and market share growth - even though the mortgage market has been rocketing downward.

"In tough times I believe there are opportunities to grow and win share," Mr. Wissinger said. "I think this is one of those times."

He said a struggling mortgage industry means a superabundance of quality originators looking for employment. It also means there are stellar opportunities to enter markets abandoned by failing lenders.

Two Inviting Targets

But to where does a lender already a presence in so many markets expand?

"Both California and the Northeast are the two macromarkets where our share is probably the least." Mr. Oman said. "There are a hell of a lot of people in those two markets."

The lender has also been looking since at least January to establish additional joint ventures with real estate brokerage companies. The lender currently has been rumored to be close to signing an agreement with a Chicago brokerage outfit.

Real estate brokerage companies represent to Norwest another branch-like outlet, conforming to the lender's plan to stay as close to the origination process as possible.

"I say let's build more relationships, let's build them stronger," Mr. Oman said. "I think we have a great opportunity."

Cuts in Support Staff

The lending industry has retrenched since February when the Federal Reserve began jacking up rates. But Norwest executives say the mortgage company has faired well, "losing business at a slower pace" than other lenders, he said.

While Norwest's retail sales staff has grown, its support staff has been slashed. The lending outfit has cut a total of 435 jobs in retail originating in the first six months of this year, an 8% reduction.

By comparison, the home loan unit of Prudential Insurance Company of America, the nation's second-largest loan originator, has fired 35% of its staff, or 1,600 employees, since May.

The retail branches have originated 7% less in the first half of 1994 than they did during the corresponding period last year. But most lenders have been hit slightly harder.

Stanching the Bleeding

Mark Lynch, an analyst at Lehman Brothers, said Norwest Mortgage was doing "as well as could be expected considering how much origination activity has fallen off this year."

Mr. Lynch said Norwest Mortgage seemed to be stanching its bleeding originations better than other lenders.

"They are keeping their heads above water," he said.

But he could not tell how much Norwest's branches were contributing to the lender's success.

Why They Were Successful

Chuck Ohmer, executive vice president, said the key to Norwest's expansion was a 1993 decision to change the lender's managerial framework.

Instead of controlling all lending functions from Norwest's home office, much of the management was transferred to employees in the field. Now 32 regional managers report to divisional heads all based outside Des Moine.

That makes for a lending team more in touch with "what's happening where the rubber meets the road," Mr. Ohmer said.

Franchise-Style Business

It also creates a McDonald's of the mortgage business. Branches are like Norwest Mortgage franchises. Each has great discretion in setting prices and making business plans.

"You hire good people and you give them the latitude they need to be successful," said Mr. Wissinger. "In return you get volume and great quality and I think that is the Norwest story."

Norwest executives attribute the lender's success to maintaining clear and frequent communication between the home office and its branches. That includes using videos, audio cassettes, how-to memos, and brochures to stay in touch.

"You have got to drip your message in a variety of ways - memos alone just don't do it," Mr. Ohmer said.

Mr. Wissinger, Mr. Ohmer, and Mr. Oman try to visit branches as often as possible.

From a recent meeting out West Mr. Ohmer learned that Norwest was now successfully recruiting new employees. He can't contain his pleasure. "I feel real jazzed and upbeat when I get back," he said.

The lender also said it provides its employees with a "smorgasbord of things to offer."

"We give our people more stuff to sell than is humanly possible," Mr. Wissinger said.

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