Disclosure pressure on Wells Fargo rises
By Suzanne Kapner in New York
Financial Times
May 1 2011
A sharp decline in Wells Fargo’s mortgage business and the unexpected departure of its chief financial officer have reignited calls for the bank to provide more disclosure about its core operations.
Wells Fargo has historically disclosed the least financial information of the large banks.
Senior management only began to hold live conference calls to discuss quarterly results in January 2010. Before that, analysts had to dial into a pre-recorded message.
JPMorgan Chase, Bank of America and Citigroup each hold annual meetings where senior executives provide an in-depth analysis of their business. Although Wells Fargo held such an investor day last year, it does not have one scheduled for 2011.
“Wells is by far the most recalcitrant of the large banks in terms of what it discloses,” said Christopher Whalen, managing director of Institutional Risk Analytics, who downgraded the bank to “negative” earlier this year, in part because of its “poor” disclosure policy. “It’s surprising that they haven’t gotten more in line with their peers.”
Disclosure issues at Wells Fargo took on renewed importance in February, when the company’s long-time chief financial officer announced his unexpected, immediate retirement. Analysts have been frustrated by the bank’s refusal to comment beyond a terse press release that said Mr Atkins’ departure was for personal reasons and “unrelated to the company’s financial condition”.
When asked recently on a conference call about why Mr Atkins left so suddenly, John Stumpf, Wells Fargo’s chief executive – in a response that some analysts characterised as flippant – said: “That is so yesterday.”
Investors’ concerns intensified in April after Wells Fargo reported a sharp decline in first-quarter mortgage banking revenue. Even though Wells is the largest originator of mortgage loans in the US, it does not break out the division as a separate entity, but rather rolls it into its community bank, making it more difficult for analysts to get a reading on how the business is performing.
Nor does Wells break out allowances for loan losses by category, such as residential mortgages or home equity lines of credit, even though all the large banks provide this level of detail.
Wells’ stock, which once traded at a premium to its peers, has been one of the worst performers among large banks so far this year.
Wells said that it had taken measures to provide investors with more information in recent years and now believed its disclosures were “strong and comprehensive”.
The company has increased its supplement to quarterly earnings to 48 pages, including several that offered additional details about the mortgage business, compared with nine pages in 2009.
Analysts agree that it has come a long way, but said it still has far to go to catch up to rivals. |
