Wells Fargo Rapidly Expands Its Valley Retail Operations By SHELLY GARCIA Senior Reporter Wells Fargo is making a big push into the San Fernando Valley as competition for retail and small business banking customers heats up. The local drive comes as all banks step up efforts to capture a greater share of deposits, a move that some analysts say could be risky because the mortgage sector that drives most other bank products and services is expected to slow. But Wells has been expanding its Valley business over the past couple of years, and it sees considerable opportunity in the home mortgage sector as well as others, despite the anticipated slowdown. “We’ve grown the number of bankers over 12 months by 30 percent; loans have grown 26 percent and deposits have grown 17 percent,” said Vince Liuzzi, regional president for Wells’ San Fernando Valley Community Bank unit. “I don’t have enough space to put these bankers, so part is to accommodate our rapidly growing sales force and part is to accommodate customers where we haven’t had a presence.” Wells, which currently has 31 retail bank stores in the Valley, in the next year will open four more branches in Woodland Hills, Northridge, Burbank and Chatsworth. Another five branches are also in planning stages in Porter Ranch, North Hollywood, Glendale, Sylmar and Sun Valley, although the timing of those openings has not yet been set. In addition, the bank plans to open three more mortgage offices locations in Lakeview Terrace/Pacoima and Woodland Hills will open before the end of the year and another location in the Burbank/Glendale area will open next year. The bank’s local small business office, which has grown to more than 30 employees from eight two years ago, will also move to expanded quarters in Sherman Oaks. The staffing increases so far have largely been needed to service existing clients. With the expansions, Wells also expects to boost its base of customers, especially in the mortgage business. “Right now, 6 percent of my clients have a mortgage with Wells Fargo, and Wells is the second largest mortgage originator, so there’s a lot of opportunity to take market share away (from competitors),” Liuzzi said. Mortgage lending is a key element for consumer banking, believed to generate the bulk of customers for other services and products from checking accounts to car loans. Business catalysts Similarly, small business lending, much of which is also handled through the branches, is a catalyst for other bank businesses. That’s why, as interest rates reached rock bottom levels over the past three years, all banks moved aggressively to grab a bigger share of the mushrooming business, and to capture those customers, they opened more and more branches. “So banks decided there was this tremendous opportunity to reach the consumer if they kept opening branches,” said Richard X. Bove, managing director at investment banking firm Hoefer & Arnett Inc. “If what these banks say is correct, every three-and a-half hours some bank somewhere is going to be opening up a new branch.” Washington Mutual plans to add about 250 new branches across the country this year. Bank of America has said it would open 550 branches by the end of next year. And Wells, which has banks in 23 states, and mortgage operations in all 50 states, will open 100 new branches in California, Arizona, Texas and Colorado in 2004 to 2005, one quarter of those will come in the Los Angeles Metro area where the bank currently operates more than 220 stores. The steep increases in mortgage lending, refinancing and home equity loans over the past three years, along with the related business these transactions brought, was more than enough to absorb the added cost of new branches. But with refinancing all but over and an anticipated slowing in purchase mortgages, these banks could be left with a bloated expense structure and insufficient business to support it. “It’s going to be real interesting over the next five years,” “said Denis Laplante, head of bank research for Keefe, Bruyette & Woods Inc. of the overall banking environment. “I think the competition for branches and the competition for deposits is only going to intensify, and it’s already pretty competitive.” The chinks have already begun to show at Washington Mutual, which has announced it will close 100 mortgage offices and shutter its commercial banking centers, moves expected to affect some 3,000 workers, as a result of the slowdown in mortgage lending. It’s believed that WaMu’s problems run deeper than a slowdown in the mortgage sector. But the increased competition for a smaller share of business could lead other banks to adopt more aggressive strategies, such as extending their hours, offering more competitive interest rates, and eliminating or reducing other fees for services, all of which would cut into the margins banks currently enjoy. Wells is better positioned than most to withstand what many say is coming. “Wells is a very formidable competitor in most of its markets,” said Laplante. “They’re probably best in class.” Steady growth For one thing, the bank has grown slowly and steadily, and it has stuck to its strategy of providing full service banking to its customers, a strategy that is likely to pay dividends as the mortgage business declines. As a general rule, the more products banks can sell each customer, the better their chance of retaining that customer and the more profitable each customer becomes. On average bank-wide, Wells customers utilize more than four of the bank’s products, five in the Valley, the company said, and the corporate mandate is to increase that number to eight. “The Wells Fargo mantra is customers aren’t necessarily price sensitive if you treat them right,” said Laplante, who has a market perform rating on Wells stock. “The Wells Fargo story line is the more products we have with you, the better chance we have of retaining you.” Then too Wells has been especially aggressive in its efforts to be part of the community where it does business. The two branches Wells operates in the Northeast Valley, for instance, are both open seven days a week, because the bank believed that the working-class customers in those markets are often unable to get to the bank during traditional banking hours. The company was also the first to accept Matricula Consular Identification Cards from Mexico and other Latin American countries, in lieu of drivers licenses and other identification, allowing new immigrants to set up bank accounts. And it has been especially active philanthropically, donating more than $10 million to projects and charities in the Los Angeles area. “We have a strong image, and that’s one of the differences between our organization and others,” said Liuzzi. “One of our favorite mottos is we want to out-local the nationals and out-national the locals. We don’t look at people, we look at the community.” Wells Fargo Corporate Profile Key Statistics Assets $397 billion Team Members 143,000 Customer households 23 million Stores 5,900 ATMs 6,183 Market value of stock $96 billion Common shares outstanding 1.7 billion
