And now, Wells Fargo

By Dick Hughes  

SEPTEMBER 21, 2010 8:48 a.m. (0)

Two years ago, South Carolina employees of Wachovia watched helplessly from afar as marathon wheeling and dealing by regulators and rival bankers fought for control of South Carolina’s largest bank employer.

The future of South Carolina’s 3,500 Wachovia employees and its dominant hold of $11.7 billion in deposits played out in late September 2008 far beyond their influence to reverse pending insolvency not of their making.

“A very painful time,” said Richard Redden, South Carolina president, and Brian Rogers, market president for Greenville and the Upstate, of what had been Wachovia and now is Wells Fargo, if not yet in name.

In interviews at Wachovia Place in Greenville, two years after the bizarre maneuvering in Washington, New York and San Francisco, Redden and Rogers talked about the way those difficult days became a time for rejoicing.

Redden said deposits are up and business, consumer and real estate loans are performing “better than what you would see peers performing at, in many cases a lot better.”  Except for the coastal market where lot loans continue to show stress, he said, “we are seeing our past dues and our credit statistics in the portfolio stabilize and in some cases start improving.”

“If we were a standalone bank, we would be quite profitable.”

They’ve added 450 employees, including 150-175 loan officers spread across the state and 50 new employees in Greenville and Upstate, a statewide increase of 15 percent above Wachovia’s level.

Wells Fargo replaced 291 ATMs in a “multi-million dollar investment” that Redden sees as in contrast to Wachovia’s practice of drawing resources from South Carolina to support growth elsewhere.

Wells Fargo has a lot to protect in South Carolina. According to the 2009 FDIC market share analysis, Wachovia/Wells leads the state in deposit share with 16.4 percent, well ahead of Bank of America at 11.6 percent and BB&T at 9 percent.

In Greenville County, it is No. 2 with 14 percent behind Carolina First’s 26.6 percent.  In Spartanburg, Wachovia/Wells has 11 percent, four-tenths of a point behind No. 2 First National Bank of the South and significantly behind No. 1 Bank of America at 18 percent.

Wells Fargo’s model “is the best thing I’ve ever operated with for a market like South Carolina, and I love it,” said Redden, 41, who joined Wachovia in Winston-Salem, went through the merger with Charlotte’s First Union and came to South Carolina with acquisition of South Carolina National Bank in 1991.

He said Wells Fargo’s decentralized control at the local and regional levels with corporate resources available as needed gives credence to the ability “to out national the locals and out local the nationals,” a Redden mantra.

Redden and Rogers are confident of greater success in a post-recession environment that will become more competitive with banking consolidation and stricter financial rules from Washington.

“The industry clearly will change with financial reform and other legislation, and in many ways I think that works for us because this company has a history of innovation and coming up with products that customers need and that many smaller banks have a hard time with,” said Redden.

In the Upstate, the most competitive market in the state, the fight for market share is expected to tighten with acquisition of Carolina First by Canadian giant Toronto-Dominion Bank, bigger and stronger rivals such as Bank of America and BB&T, an expansionary SCB&T and new life and capital for banks such as Palmetto Bank and First National of the South.

Even the nation’s largest national banks lay claim to being ‘local,” but Redden said it is not what they say but how they act. “You can’t fake local.”

The measure of local, Redden and Rogers said, boils down to what Wachovia/Wells Fargo does well:  community involvement from tellers to managers, support of nonprofits, local philanthropy, deep customer relationships, good service, local decision-making for ordinary financial needs and corporate resources for specialized needs beyond a local bank’s reach.

Redden noted the South Carolina region was Wells Fargo top performer in customer service out of 53 regions last month and has been in the top 10 percent every month this year.

Redden said Wells Fargo inherited a core group of 40 senior executives whose average time in banking “is 23 years and the average time with our company is – and this is what blows me away – 20 years.”

That includes Rogers, 44, who was raised in Greenville, was with First Union in Atlanta at the time of that merger and returned home as market president for the Upstate 14 years ago.

These bankers have gone through “thick and thin” with Wachovia and its predecessors and are “supercharged about the position we are in moving forward with Wells Fargo,” said Redden. “This is the team that made it through 2008 with Wachovia in the newspaper every day with an extremely painful situation.”

Unaffiliated mortgage lenders failed, making unsalvageable Wachovia’s already dicey holdings from its ill-fated $25-billion acquisition of Golden West of California. Talks began and quickly ended with JP Morgan.  A Spanish bank expressed interest but was rebuffed as a foreign entry, said the Wall Street Journal.

With hundreds of millions of backing promised by the Bush administration, a deal was struck with Citibank that would strip Wachovia of a large share of assets and pay Wachovia’s shareholders just a $1 a share. The deal was announced with fanfare by Washington regulators and Citibank.

It soon was off, scrapped in the middle of the night, when Wells Fargo, thought to have pulled away earlier, emerged with an offer to buy all of Wachovia and give shareholders more than five-times the Citibank price. And Wells Fargo would do it without government assistance.

Redden said watching the drama play out was painful “because we are proud of the bank and to see the bank appropriately criticized for issues and decisions it made hurt.  But the reality is Wells Fargo and the timing when the merger happened put us in a position ahead of a lot of banks that still are aching through this recession.”