Wells Loses Key Staffers In Reshaping Private Bank
Wells Fargo & Co. has reshaped the lending philosophy of its private bank, leading to the voluntary departure of the unit's top credit executive and the purging of several members of his senior staff.
Wells' lead California bank is backing off from making big loans to high-rolling customers in order to concentrate on trust banking and small loans to professionals and other affluent individuals.
The decision came amid escalating credit losses in corporate and retail banking.
Origins of Policy Shift
Well-placed sources said the overhaul of private banking operations coincides with large losses on personal loans to George Gillett Jr., a Colorado tycoon whose empire of broadcast and resort-hotel holdings filed for bankruptcy earlier this year.
Mr. Gillett's failure to repay the bank is likely to result in a loss for the year in the private bank's credit and deposit division, sources said. The private bank at Wells also includes an investment management and trust division, which is believed to be profitable.
The lending division earned about $9 million in 1990 and about $3 million in the first half of 1991, according to a source familiar with its operations.
The precise amount of its exposure to Mr. Gillett, the developer of the Vail, Colo., ski resort, could not be learned, but sources said it amounted to several million dollars. Mr. Gillett did not return calls for comment.
|We Made a Shift'
Wells officials insist that the private bank's new approach to lending was developed before the extent of losses to Mr. Gillett became known.
"We made a shift in philosophy" in private banking, said a senior Wells official. "There has been a shift away from large credit transactions."
As a result of the changes, Frederick S. Taff, a senior vice president who has run the credit and deposit side of private banking since the mid-1980s, resigned at the beginning of October.
"My decision was based on philosophical differences with going downstream in the market," Mr. Taff said in a telephone interview on Friday. "I didn't think you could achieve the profitability" from smaller credits that could be gained from large transactions.
Meanwhile, Wells has dismissed private bank office managers in San Diego, Beverly Hills, and Palo Alto, sources said.
A bank spokeswoman said the company has not yet named a replacement for Mr. Taff, who joined Wells about five years ago from Citicorp. She confirmed that changes have occurred in Wells' luxury lending unit as part of a broader strategy to control risk throughout the company.
The stock of Wells, the nation's 10th-largest bank, has been suffering in recent quarters as investors questioned the company's heavy exposure to leveraged buyouts and real-estate credits. Wells is also believed to have made private banking loans to the entrepreneurs behind many of the corporate credits.
"Wells Fargo, in my opinion, had one of the best private banking divisions in the country at one time," said Marilyn Magruder Barnewall, a private banking consultant who worked with Wells several years ago. "But it appears they've gone the way of so many banks in thinking that private banking loans are nothing but an offshoot of commercial lending."
In mid-1991, Wells' private banking unit had about $1.2 billion in loan commitments, roughly $650 million in outstanding credits, and $35.6 billion in assets under management, a bank spokeswoman said. Deposits amounted to about $250 million.
Earnings at the parent bank company fell 47% in the third quarter from the year-earlier period to $86 million, largely because of big additions to reserves and writeoffs.
Private banking officials said that the new downscale path being carved by Wells is also occurring at Citicorp, Bankers Trust New York Corp., Bank-America Corp., and several other big companies.