CALIFORNIA’S CHANGING BANKING SCENE : Wells Fargo Chief to Retire : Finance: Carl Reichardt to stay on through end of 1994 after 11 years at the helm. Paul Hazen will succeed him.

Carl E. Reichardt, one of the banking industry’s most colorful figures, announced unexpectedly Tuesday that he is retiring early as chairman and chief executive of Wells Fargo & Co., a financial institution he has headed for 11 years through good times and bad.

Reichardt, who just turned 63, will be succeeded at year’s end by 52-year-old Paul Hazen, president of San Francisco-based Wells Fargo and its primary unit, Wells Fargo Bank.

“Now was the right time,” said Reichardt, who will remain on the bank’s board. “I had accomplished just about everything I wanted to, and the management team we’ve assembled here is the right one. There is not a lot left for me to accomplish.”

At a news conference at the bank’s headquarters, Reichardt noted that Wells Fargo’s biggest stockholder, Omaha billionaire Warren E. Buffett, tried briefly to dissuade him from leaving.

“He’d like to see people work forever,” Reichardt said of Buffett. “I told him, ‘Warren, there just ain’t no way.’ ”

Hazen will be succeeded as president by William F. Zuendt, 47, currently a vice chairman of the bank. All three men have been with Wells Fargo--the state’s third-largest banking company with assets of $52.3 billion--for more than 20 years.

Hazen, considered the odds-on favorite to succeed Reichardt, will inherit a bank whose profit is again growing sharply, thanks to a steady decline in bad loans and widespread cost cutting in the past three years.

Hazen told reporters that he won’t run the bank much differently than Reichardt did, but he noted that Wells Fargo wants to employ more technology in its business, such as offering customers extra 24-hour services via telephone or computer.

But Hazen faces several challenges. He must find ways to get Wells Fargo’s loan business growing again amid continued weakness in California’s commercial real estate market. He will also be under some pressure to buy another financial institution as the banking industry continues to shrink, analysts said.

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Meanwhile, in a separate announcement Tuesday, Wells Fargo said its profit in the first six months of the year totaled $408 million, up 59% from the same period of 1993.

“Reichardt shepherded Wells through its worst years, and now California’s economy is on the mend,” said Mark Zandi, chief economist for Regional Financial Associates, a consulting firm in West Chester, Pa. “That will make the transition of power smoother, because Hazen will be able to concentrate on growing profits instead of putting out fires.”

Such profit also paved the way for the financial institution to announce that its board has authorized the repurchase of up to 5.4 million shares of company stock--or 10% of the total common shares outstanding--on the open market. (At Tuesday’s closing price, that would cost the bank more than $850 million.)

Hazen told reporters that the bank might try to increase its already formidable out-of-state commercial real-estate lending business because California’s market for office towers and other commercial buildings remains weak. The bank may also try to expand its out-of-state car-leasing business, he said.

The Michigan-born Hazen also has to maneuver Wells Fargo, which currently operates mainly in California with 618 branches and 17,600 employees, through the consolidation of the nation’s banking industry. He must determine what other banks, if any, Wells Fargo should buy.

Hazen said Wells Fargo might eventually try to buy out-of-state banks, but not until prices for those banks begin to fall.

Reichardt, who supervised the $1.1-billion purchase of Crocker National Bank in 1986, made little secret of his desire to merge Wells Fargo with First Interstate Bancorp, the Los Angeles-based parent of First Interstate Bank. But the two have never come to terms.

“Probably the biggest challenge facing Hazen is going to be the big strategic deal, whether it is a significant acquisition--a la First Interstate--or some kind of marriage of equals,” said Bert Ely, a banking consultant in Alexandria, Va. “At some point, they have to break out of California.”

Reichardt acknowledged that the failure of a Wells Fargo-First Interstate merger was among his few disappointments while at the bank’s helm. “I was out there on the dance floor with my rouge on, but nobody came out,” he said.

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Reichardt’s retirement means the banking industry will lose one of its more creative and colorful figures. “If you talk to people in the banking industry and ask who is on your short list of the top CEOs, Reichardt is on the list,” Ely said.

A gruff, cigar-smoking Houston native known for his taste for fine wines and occasionally salty language, Reichardt was among the pioneers in marketing mutual funds through bank offices. He also resisted the common practice of selling his bank’s problem loans in bulk at distress prices, preferring to work with borrowers to nurse the loans back to health.

That led to one of Reichardt’s high-profile skirmishes with banking officials in 1991, when regulators insisted that Wells Fargo write off a $100-million corporate loan. Reichardt resisted because the borrower was still making payments. The regulators prevailed.

That write-off and other major problems with Wells Fargo’s commercial loan portfolio sent the bank into a nose dive in 1991, when its earnings plunged to a paltry $21 million from $712 million the previous year.

But Reichardt then steadily pared the bank’s bad loans and its operating costs, sparking a major rebound in the bank’s profit. Among the believers in Reichardt was Buffett, whose Berkshire Hathaway now holds 12.2% of Wells Fargo’s stock.

Their investment paid off. The stock, which dipped to about $40 a share in 1990, closed Tuesday at $157.50--down $1.25 on the day--in New York Stock Exchange composite trading.

Among the beneficiaries is Reichardt himself, who owns about 548,000 shares--including options--with a market value of $86 million.

Thomas Brown, an analyst with Donaldson, Lufkin & Jenrette Securities, said one of Reichardt’s legacies will be that he assembled a strong succession team.

“It’s the greatest compliment to a CEO when you can say that the company is so well managed that it won’t miss a heartbeat without him,” Brown said.

The Reichardt Era at Wells Fargo

During Carl E. Reichardt’s 11-year tenure as chairman and chief executive of Wells Fargo Co., the financial institution’s assets roughly doubled to $52.3 billion while its stock price has risen from less $20 a share to $157.50

Carl E. Reichardt: Career Highlights

* Receives economics degrees from USC in 1956.

* Joins Union Bank in Los Angeles in 1960 and eventually becomes executive vice president.

* Joins Wells Fargo Bank in 1970 as president of its real estate investment trust division. Named executive vice president of Wells Fargo & Co., the bank’s parent, three years later.

* Becomes president of Wells Fargo Bank in 1978 and president of Wells Fargo & Co. a year later.

* Is elected chairman and chief executive of entire organization in 1983.

* Wells Fargo halves its dividend and annual profit plunges to $21 million in 1991 because of problem loans and the worsening California recession.

* Wells’ profit rebounds to $612 million in 1993 as problem assets are reduced and the dividend is restored.

* With Wells’ profits continuing to climb, Reichardt unexpectedly announces retirement in 1994, two years years shy of his 65th birthday.

Sources: Company reportmanyeorts; TradeLine

Times staff writer Kathy M. Kristof contributed to this report.