Unassuming, self-deprecating, modest, team-oriented… John Stumpf is not your average bank CEO, but his methods are having a hugely positive impact upon Wells Fargo. Jane Cooper speaks to him at his San Francisco office.
He held it steady through the financial crisis, steered it through a major acquisition, and last year he drove Wells Fargo past a major landmark when it became the world’s largest bank by market capitalisation.
John Stumpf, Well Fargo’s chairman, president and CEO, is straightforward in his goals and for a bank so large, there is a notable absence of big talk, grand plans or aggressive targets. And his preference for plural pronouns – us, we and ours – means he often leaves himself out of descriptions of the bank and what he is trying to achieve.
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While the integration of financial services company Wachovia in 2008 would have been a main talking point a few years ago, Mt Stumpf says: “Today we are talking about serving more deeply, making sure the risk systems – from cyber to interest rates, operational risk and credit risk – are up to standard. We want to be world class.”
On the question of what the bank is currently focusing on, Mr Stumpf says: “Whatever is more current or contemporary is not in replacement of, but added to the things that we do. The overall goal is to develop the relationships with team members, have deep relationships with our customers and deep relationships with our community. If there is one word to define our culture it would be ‘relationship’.”
Showing the way
This culture traces its origins back to a stagecoach company that was founded in 1852. Its iconic imagery has remained even as other banks – such as Norwest in 1998 and Wachovia in 2008 – have been rolled into the Wells Fargo brand. The company’s slogan in its early days was ‘The Fargo Way’, which it associated with being trusted to transport its customers’ money and valuables across the country via a horse-drawn stagecoach. While the technology has changed, the principle remains and Mr Stumpf seems more interested in preserving the Fargo Way than establishing his own John Stumpf Way.
In 1864, the bank’s co-founder, Henry Wells, laid out his philosophy, which mr Stumpf describes: “There was one very powerful business rule. It was concentrated in the word courtesy.”
Indeed, it is noticeable that Mr Stumpf is courteous and has manners from a bygone era: he pulls the chair at for me as I go to sit at the table for the interview. He then points to another chair and makes a comment about its torn upholstery. Such self-deprecation is disarming – perhaps attributable to the Midwestern charm he is known for – and unusual for a bank executive in his position. While most large banks would not have such chairs on the CEO’s floor, if they did, they certainly would not draw attention to them.
When asked if he, like Mr Wells, has a single business rule, Mr Stumpf replies: “To satisfy all our customers’ financial needs and help them succeed financially.” With a mantra like this, which is echoed by senior executives throughout the bank, Mr Stumpf pays attention to how his rivals treat their customers. “People often ask me ‘which bank are you most impressed with?’ and I say Amazon, Google and Apple... They are not banks but they are redefining customer service and value to people who buy goods and services. It impacts all of us and helps all of us raise our game,” he says.
Of the bank’s objectives, Mr Stumpf says: “Every morning 265,000 of us focus on the customer. The first thing is not making money; that is the result of what we do.”
Strong performance
The results have been good, but Mr Stumpf is not one to brag. At the end of 2013, according to The Banker Database, Wells Fargo was the world’s fifth most profitable bank, ahead of its US rivals JPMorgan, Bank of America and Citigroup. By the end of 2013, the bank had generated record earnings for the fifth consecutive year and its net income was $21.9bn, up 16% from in 2012. It also reported annual revenue of $83.8bn.
In its recently reported quarterly results, Wells Fargo generated net income of $5.7bn for the third quarter of 2014, up 3% from the same period a year earlier. Revenue for the quarter was $21.2bn, up 4% from the year before, and pre-tax, pre-provision profit was $9bn, up 7% from the year before.
Litigation and regulatory penalties have tarnished the results of Wells Fargo’s major US rivals in recent months, and although Wells Fargo has not been without its settlements and lawsuits, it has not been impacted to the same degree.
The economic environment in which the US banks are operating is improving. When the third-quarter earnings were announced, Mr Stumpf noted that in September some 248,000 jobs had been added to the US economy, household wealth was at an all-time high, and the consumer debt burden was at its lowest level for 30 years.
House call
Mr Stumpf is optimistic about the prospects for the US economy. He says that housing has not led the recovery as it has in previous slumps. Among the reasons for this, he says "household formation" is coming later than in previous recoveries. Unlike Mr Stumpf, who married at 21 and bought his first house at 22, Americans today are generally getting mortgages later in life. Also, Mr Stumpf points to the overhang of student debt that is affecting the ability of many young people in the US to service a mortgage, while housing availability is short in coastal areas in the US. Added to this, not all customers who apply for a mortgage can get one as the availability of credit is lacking, which Mr Stumpf partly attributes to repurchase risk.
In August 2014, the Financial Times reported how Mr Stumpf had warned that Wells Fargo would not be able to lend to consumers with lower credit scores if repurchase risks were not reduced. He said that Fannie Mae, Freddie Mac and the Federal Housing Administration – which buy mortgages – were too quick to accuse banks of faulty underwriting when there is a problem with a loan, even if it is a technical issue unrelated to the customer’s ability to repay, and force the bank to repurchase the problem loans.
Despite this concern with mortgages, the bank’s lending had increased in the third quarter of 2014, with loans of $838.9bn, up 4% from the third quarter of 2013. Credit quality had also improved for the quarter, with net charge-offs of $668m, down $307m from the third quarter of 2013.
Growth opportunities
Mr Stumpf highlights some of the opportunities for Wells Fargo to grow. One is making sure its credit cards are at the top of the wallet of the bank’s existing customers. Another is in the wealth, brokerage and retirement business. “We have more than 10% of deposits [in the US] but do not have 10% of wealth in the country,” says Mr Stumpf.
“We do not say to ourselves ‘we are not number one in this business so we have to be number one’. That is not the motivation. The motivation is that we have great people and great products and a great distribution, and we can add more value to customers and share the value with them.”
He also points to the opportunities that exist in the mortgage market. Even though Wells Fargo has the largest mortgage business in the US, Mr Stumpf estimates that half of the bank’s customers will have their mortgage with another bank.
When asked what his greatest concerns or challenges are, he says: “I have a lot of confidence in our team. In 163 years our team member engagement and financial performance has never been better. I probably worry about cyber risk more than anything else.”
Does this kind of issue keep him awake at night? “I think about things, but I am not a worrier. I tend to be a doer, not a worrier.”
Indeed, Mr Stumpf does not lose any sleep worrying, though he does habitually get up at 4.30am, which he jokes is motivated by sibling rivalry: his brother is a farmer and “I do not want him to get up earlier than me”. Mr Stumpf is in the office by 5.30am and usually goes home between 4pm and 5pm, has dinner, cleans up his email inbox and reads before he goes to bed.
A team effort
Rising early is a habit Mr Stumpf has kept from growing up on a farm, where he worked alongside his six brothers and four sisters. He credits his parents with instilling the values of team work. “When you grow up as a farm boy – we were very poor farmers – you learn working together and optimism go a long way,” he says.
Such talk of teamwork extends to how Mr Stumpf manages Wells Fargo, and how he thinks about the legacy he wants to leave at the bank.
“The star of this team is really the team," he says. "Like a football team, every position is important. This is my 33rd year at the bank and [the 11 people in my management team who directly report into me] have an average of 28 years [of service to the bank]. I know their children and, in some cases, their grandchildren. It is not about the CEO. The job for all of us here is to leave the company in better shape [than we found it]. If I have one job, it is keeper of the culture – the culture of relationship – of team members, of putting customers first, investing in our communities and all the things that go along with that. That is the most important thing. I do not believe in legacies; it is surely not about me.”
Mr Stumpf is known for being self-effacing and not taking credit for the bank’s successes, but perhaps this is not surprising for someone who grew up as one of many in a household where the personal pronouns of I, me and mine were discouraged in conversation.
The data rush
Wells Fargo’s origins are steeped in the California gold rush of 1849, and when asked what the modern-day equivalent of the gold rush is, Mr Stumpf answers: “I did hear someone say a few months ago ‘what gold was to the 19th century, energy or oil was to the 20th century and data is to the 21st century’.” He explains that data can be an umbrella for digital technology and the online and mobile banking that is now possible.
The improvements in such technology have been vast, even in the time since Mr Stumpf joined Wells Fargo from Norwest in 1982 and steadily climbed up the ranks of the bank. When Norwest was merged with Wells Fargo, he became the head of the banking group in the US south-west, then two years later he became the head of the group for the US west. After another two years he became Wells Fargo's executive vice-president of community banking. In 2005, he became the bank’s president, in June 2007 its CEO, and its chairman in January 2010, all positions that he still holds today.
Coming from a poor farming background, where he had to share a bedroom with his six brothers, such a rags-to-riches story is the stuff that the American dreams is made of. In 2013, his compensation totalled $19.3m.
So how does Mr Stumpf feel about his wealth now, coming from such a modest background? “I get the fact that I have been lucky. I have been privileged, but it is not an important thing in my life... It is not that important to me.”
At ground level
Although he has become successful, Mr Stumpf does not carry the trappings of someone in such a senior position. There is no separate elevator for the CEO at the bank’s main office in San Francisco. In fact, Mr Stumpf makes a point of riding in the elevator with the bank’s staff: “When I get in the elevator I talk to everybody – the phone in pocket, hand out meeting people [and shaking their hands] – asking them how long they have been here and what their aspirations are.”
He adds that every day he aims to talk to a customer, a prospect and a team member. On the day of our interview he had a call scheduled for 11am with a large corporate customer.
And unlike many CEOs, Mr Stumpf is not chauffer-driven home. He prefers to walk home while learning German, his father’s native language. He walks five or six miles a day while listening to the lessons, repeating the phrases out loud. Do passersby on the streets of San Francisco know who he is when he walks by? “I just blend in. I’m a fast walker,” he says.
Such discipline and focus gives an insight to Mr Stumpf character. And while he may like to blend in and go unnoticed, it is inevitable that Wells Fargo’s successes of today will be attributed to his leadership – the John Stumpf Way – even if he won’t take the credit for it.
