Different Strokes


Is Wells Fargo & Co. going to put out the welcome mat for consumers again?

That, analysts say, is a strong possibility as a result of the merger agreement announced Monday between the San Francisco-based bank and Norwest Corp., a highly regarded regional bank based in Minneapolis that couldn't be more different from Wells.

While the two banks are similar in asset size--each at about $95 billion--they have gone in opposite directions, reflecting two warring strategies in retail banking.

Wells is a pioneer of the high-tech, cost-cutting approach; it has closed hundreds of traditional branches in favor of installing automated teller machines, computer banking and small counters in supermarkets. Wells pulled out of the home-mortgage business, focusing on high-end customers and imposing fees on consumers who don't bank its way. It sells itself as an urban bank for people on the go.

Norwest, by contrast, is the nation's largest home mortgage originator, reigning in rural areas such as the Dakotas and Rocky Mountain states. Walk into one of its 960 branches and you won't see four ATMs, but 18 full-time workers--twice the number at a typical Wells branch--who are intent, and successful, in selling as many loans and services as possible to each customer.

"Wells is much more of a low-cost producer, with a 'have it our way' style, and Norwest is more of relationship-building kind of bank," said Kenneth Stevens, chief executive of the retail arm of Midwestern financial giant Banc One Corp. Stevens hesitated to predict which of the two strategies will win out, but he and other analysts figure Norwest clearly has the edge.

And why? For one thing, it is Norwest's chief executive, Richard Kovacevich, who will run the new bank, not Wells Fargo's CEO, Paul Hazen. Moreover, Norwest has consistently performed well this decade, whereas Wells, once a Wall Street favorite, has struggled since its hostile takeover of First Interstate Bank in early 1996.

"The Wells name is a better symbol, but it's certainly tarnished," said R. Jay Tejera, a banking analyst at Dain Bosworth Inc. in Minneapolis, who expressed shock at the merger deal precisely because of their opposing styles.

Tejera is betting that Norwest's culture will emerge as the dominant one. As a result, he thinks Wells will now go back to making home mortgages, using that to cross-sell other loans and build its customer base, as Norwest has. Tejera says Norwest sells on average 3.8 banking products to each household, compared with 2.4 for Wells, which is slightly below the industry average. Norwest's approach has clearly led to better results, he said.

Wells may have had the upper hand if it weren't for its messy integration of First Interstate. After taking over the Los Angeles-based bank, Wells angered tens of thousands of customers in the West by closing branches, cutting jobs and changing policies.

It had numerous computer and service glitches that led to lost deposits, among other errors. It eliminated a check-guarantee plan that had people complaining in Nevada, and it failed to put up rain shelters over ATMs in the Pacific Northwest while not putting sun screens over them in Arizona. At its worst, in spring of last year, Wells admitted that it was losing a stunning 1.5% of its accounts a month.

A Wells spokeswoman said Monday that attrition has stopped today, and in the last couple of quarters the bank has boosted its earnings and confidence among investors. Its stock price, which took a precipitous fall last year, also has rebounded nicely, thanks in large part to rumors that it was a strong takeover target.

Some customers at Wells also say they have seen noticeable improvement in service in recent months. Steven Oppenheimer, a biology professor in Northridge, complained when he walked into a Wells branch and saw a sign on the counter that encouraged him to use the ATM.

"It looks like they've mended their ways," he said, noting that the sign is gone and bank employees are more responsive.

But other customers and consumer groups said they had seen no evidence of Wells moving away in recent months from its strategy of pushing customers to ATMs and banking by computer or phone, while emphasizing more profitable corporate customers and wealthy individuals.

"If you're an important customer, they work with you. If you're not, they don't seem to care about you," said Neil Stone, an Echo Park furniture store owner.

Gail Hillebrand, a lawyer for the nonprofit group Consumers Union in San Francisco, said the company has recently moved further to eliminate free checking accounts for customers who do not sign up for direct deposit accounts. Hillebrand noted that Wells Fargo just ended its practice of providing free checking accounts for senior citizens who previously had such service with First Interstate--a policy change that Wells confirmed as affecting the elderly and some others.

For Hillebrand, the merger news represented hope, hope that Wells would offer more personal service and retreat from its policy of charging high fees for ATM use for noncustomers and other services.

"We might see some backing away from this electronic approach to the customer," she said. "It depends on who comes out on top in terms of the business philosophy of the bank."

Analysts say some investors appear to be skeptical about the ability of Wells and Norwest to blend their cultures. But if they succeed, the new and bigger Wells Fargo is expected to be a formidable player in the West, along with Bank of America and Washington Mutual, both of which have announced recent mergers.

"If it works, you've got this tremendous footprint in terms of attractiveness," said Tejera, the Minneapolis analyst. He noted that the West is growing twice as fast in population as most of the rest of the nation and that Wells Fargo's new 21-state franchise will lock out other regional players who are begging to do business in the West.

"The stagecoach will now go everywhere," he said, adding that consumers also are likely to win in the long run. "One thing Wells customers will see is higher service and staffing."


Times correspondent Stephen Gregory contributed to this story.


Joining the Crowd

The $32-billion proposed merger of San Francisco-based Wells Fargo & Co. and Minneapolis-based Norwest Corp. would create the nation's largest mortgage originating company and its largest Internet banking firm. The new company, to be based in San Francisco, would have branches in 21 Western and Midwestern states. The combined company's holdings and where its branches are located:


The Banks


Wells Fargo Norwest Combined Assets, in billions $94.8 $96.1 $190.9 Loans, in billions 64.5 44.2 108.7 Deposits, in billions 72.3 57.8 130.1 Customers, in millions 10.0 9.9 19.9 Branches 1,930 960 2,890 Employees 32,414 58,255 90,669


Note: Figures are as of March 31 *

The Territory

Wells Fargo and Northwest branches overlap through much of the Southwest.


Source: Company Reports

Researched by Jennifer Oldham / Los Angeles Times

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