Wells Fargo & Co Chairman Dick Kovacevich is not against the No. 5 U.S. bank making a major acquisition, but he said on Tuesday the prospect of that happening is unlikely even as large rivals become vulnerable due to shaky subprime lending.
Kovacevich said the San Francisco-based bank is in good position to buy smaller banks and portfolios of bonds and loans as they become more reasonably priced.
We're buyers, Kovacevich told Reuters in an interview. For the first time in three years, things are making sense.
The bank has the capital to make such purchases and has avoided major financial headaches by not plunging into the riskiest corners of the subprime lending market. Escalating subprime mortgage defaults have whipsawed rivals such as Washington Mutual and Countrywide Financial Corp.
On the acquisition front, Kovacevich said Wells Fargo is more likely to buy a bank with $10 billion in assets than a much larger institution.
Our primary activity will continue to be acquiring smaller institutions like the two we did this year, he said. ...We'll see increased (acquisition) opportunities, given the challenges in the industry.
It's not likely we'll do a bigger deal, he said, but added, We're not against it.
Kovacevich said he is not worried about large rival banks such as JPMorgan Chase & Co capitalizing on the industry's turmoil and scooping up a major lender like Washington Mutual.
Wells Fargo's track record has been to go after smaller banks. In May, it agreed to buy East Palo Alto, California-based Greater Bay Bancorp, which had $7.4 billion in assets, for $1.5 billion. A month later, it completed the $645 million acquisition of Sacramento, California-based Placer Sierra Bancshares, with assets of $2.6 billion.
Kovacevich said those two deals were relatively large for Wells Fargo, which had $549 billion in assets at the end of the third quarter.
The second-largest mortgage lender behind Countrywide, Wells Fargo lost market share by not offering the riskier subprime mortgages pushed by rivals, Kovacevich said.
Now, the bank looks to regain ground as others take large write-downs and slash their dividends to preserve capital, he said.
This is a good environment for us, Kovacevich said. We have the capital. And we don't have the workout problems that others have.