Wells Fargo is Doing it Right

...at least that's the way it looks to me.

Sitting on some cash after selling my home, I've been watching the stock market. It's a good time to have cash, too. Every time the market goes down, the value of my cash goes up. I've been looking at the banking and home improvement sector the closest. No matter how toxic the situation is for the banks, everyone needs one. As they fall in value, the buying looks better and better. After watching and reading the Wall Street Journal for a while, I discarded a bunch of bank stocks as losers (Citibank, Bank of America and a few others) and have started looking most closely at Wells Fargo. I just went through their report to investors and was cheered by what I found.

Wells Fargo has avoided most of the problems in their industry. Unlike some of the other big banks, WF has been making a profit all along. As I read their investor's information presentation, I could see why. Here's what they've been doing with debt consolidation loans:

• No interest-only, option ARMs or negative amortizing loans in portfolio


• Brokers, correspondents, or national advertising campaigns not used


• Full documentation and require income verification

In other words, they behaved like bankers, not loan sharks. The end result is that while their competitors are having to restructure bad debt and make excuses to investors, Wells Fargo is cruising along, making money and growing.

It looks like Wells Fargo is the one best situated to take advantage of the problems and losses all across their industry. Eventually the bad investments and foreclosures will work their way out of the system and banking will regain its footing. When that dust settles, I would think that Wells Fargo will be in a much stronger position that it was when this whole mess started.

Update: I did a little searching around the blogosphere and came up with more positive reviews of WF. The White Oaks Blog mentions how WF has really improved their home mortgage process.

Over at Customer Experience Matters, a survey of banks' behaviors puts WF at the top of some lists and the bottom of none.

Over at Investment Moats, drizzt had this to say about WF:

The bank is now reaping the rewards of keeping its powder dry. The company did add $1.5 billion in the second quarter to its provisions against bad loans, but net charge-offs climbed to just an annualized 1.55% for the quarter.

The relatively modest losses have let Wells Fargo increase its lending just as its capital-constrained competitors have pulled back.

That was my thought exactly.