John Stumpf has an unusual pedigree among the CEOs of the nation’s largest banks. He grew up in rural Minnesota, attended college at St. Cloud State University and got his MBA going to night school. But since joining Norwest Bank in Minneapolis in 1982 he has steadily climbed the ranks, with a particularly rapid ascent after Norwest merged with Wells Fargo in 1998. He became CEO of Wells in 2007, just in time for the financial crisis. As part of a story on Wells’ new status as the nation’s most valuable bank, Stumpf spoke with the Times about where he came from and how he approaches business.
Los Angeles Times: Tell us about your upbringing.
John Stumpf: We grew up on this 120-acre dairy and poultry farm. And I’ve said many times, we were poor in some of the world values, but we were rich in some of the values that really are important, like personal responsibility, teamwork, respect for each other, helping out. I like to say it was the value of plural pronouns: us, we and ours. There wasn’t time for personal pronouns: I, me and mine.
Of the seven boys in the family, I was the only one that went to college. It’s not because education wasn’t important. It was just that they all had different ideas.
One of the rules of the house, incidentally, was everybody had to play a musical instrument before you played sports. I played trumpet in high school. It was a very small town, only 900 people in this town. There were only 35 members in the band, so when the Stumpfs didn’t show up for band practice they canceled it. They’d call my dad and say, ‘Herb, are the kids coming for band practice?’
LAT: Wells has recently become the largest bank in the country by stock market capitalization. What is Wells doing that other trillion-dollar banks aren’t?
JS: I would say that first of all, culture is extremely important. You can’t get the reasons for business and the results of business backward. The reason we get up every morning and go to work is to serve customers. We want long-term, mutually beneficial relationships with our customers. The result is you make money. Not the other way around.
The star of the team around here is the team -- it’s not any one person. We work together. This is a family of sorts.
LAT: You are growing your investment banking operations when others are cutting back. What is the thinking there?
JS: Prior to [purchasing Wachovia in 2008] we did not really have an investment bank business. They had a terrific group of people. We didn’t keep all the businesses in the capital markets but we kept the things we believe make sense. When we’re dealing with a corporate customer, this gives us another tool in the toolbox - another arrow in the quiver to help them succeed financially.
I don’t have any pre-defined goals for how big it needs to be. We’re not going to chase that business – we’re not going to use our balance sheet to take on marginal credit so we can get investment banking business. That’s a downward spiral. We’ve seen that movie too many times in other places.
LAT: How did Wells decide to avoid the subprime mortgage market before the financial crisis?
JS: I remember in the 2002 or 2003 time frame, we were the No. 1 mortgage company in volume for the three or four years before that. All of a sudden a competitor said they wanted to become No. 1. This competitor said, ‘We’re going to do negative [amortization] loans. We’re going to do layered risk on subprime. We’re going to do this, that and the other thing.’
We talked among ourselves about this competitor and others -- they weren’t the only one -- and we decided this was not good for our customers. If it’s not going to be good for them, it can’t be good for us. So we ceded market share. We gave up billions of originations -- hundreds of millions of dollars of earnings -- because we didn’t think this was right. As it turned out, it was not good for the customer. So if you put customers first and help them succeed financially, ultimately their success will be your success.
LAT: You, like other banks, have faced anger for increasing fees on retail customers lately. Why is that necessary?
JS: We want to offer great value to our customers, but we also recognize that these things don’t happen for free. There was a study done not long ago that suggests it costs around $300 a year to provide a checking account. Most of our customers pay for that by having five, six or seven products with us. In some cases, customers do not have that many products with us and we’ve adjusted our pricing so you can pay something per month. This is an evolutionary process.
LAT: You ended up on the front page of newspapers in 2010 when you got the biggest salary of any bank CEO. Given your positioning as a sort of people’s bank, how have you thought about bonuses?
JS: We have some principles that are time-honored around here. First of all, we do salary comparisons within our industry because we want to be able to retain and motivate our very best people. Secondly, we want to align our compensation to be consistent with that of our shareholders, so if the shareholders do well we do well. We also want to make sure that our compensation does not increase the risk of the company. If you take my compensation, for example, the majority of it -- the high majority of it -- is in stock, and it’s stock that’s at risk. If the company does poorly, I could lose most of it or all of it.
LAT: We heard about how much you walk and listen to music. Tell us about that.
JS: There’s a secret about weight – it’s math. You can eat more if you exercise more. Since I like to eat, I have to walk. I actually walked over 200 miles in the month of December. On my iPod I have an eclectic group of tunes because I used to play in this rock band. You’ll find things all the way from Buddy Holly to Bill Haley and the Comets. But I’d say the Bee Gees are up there.
LAT: What has changed for Wells Fargo since 2008?
JS: There’s no question that 2008 changed the landscape for our company. We doubled in size. We became much more of a national company and much more on the radar screen.
The real value of Wells is that we don’t need to do things differently. What we’ve been doing for many, many years is what we are continuing to do.