Wells Fargo Execs Reassure Troops
In Memo, They Say Bank Can Survive on Its Own
SAN FRANCISCO - Wells Fargo & Co. doesn't need to make acquisitions to remain competitive after its two biggest California rivals join forces, the company's top executives say.
The claim appears in an Aug. 19 memorandum to Wells managers from chairman and chief executive Carl E. Reichardt and president Paul Hazen. The statement was issued a week after BankAmerica Corp. and Security Pacific Corp. announced their merger agreement.
"The franchise we have in California is solid," the memo said. "We are in a market where there is plenty of room to grow, even if we never did another acquisition."
Questions Were Raised
The memo was aimed at reassuring Wells employees in the face of news reports that questioned the company's ability to slug it out with a competitor more than three times its size, a spokeswoman said.
In the memo, Wells executives argue that the company has all the competitive firepower it needs:
"What we will do next is what we have been doing all along: concentrating on being the best bank for Californians, not the biggest. Over the past 10 years, our strategy has been to cost effectively deliver convenient service to our customers and superior returns to our shareholders.
"[BankAmerica] was four times our size in the early 1980s and . . . we rose to the challenge during that decade. We outperformed them on quality, not quantity. We will continue to do it in the current decade."
There has been widespread speculation that Wells could be forced into a merger in order to compete. Speculation has centered on a Wells purchase of First Interstate Bancorp, parent of California's fourth-largest bank, or a large western regional banking company such as U.S. Bancorp, Portland, Ore. or Valley National Corp., Phoenix.
The view that Wells would be forced to merge is based on the presumed economies of scale that allow a big bank to operate more efficiently and underprice smaller rivals. But many analysts agree that Wells is already large enough to keep pace.
"A Wells merger has been viewed as almost an imperative. That's nonsense," said Donald K. Crowley, analyst with Keefe, Bruyette & Woods Inc. "Wells has substantial market share in California."