SAN FRANCISCO — With its iconic stagecoach, Wells Fargo & Co. has evoked images of the wild West throughout its 156-year history. Now it’s finally expanding east of the Mississippi with a $12.2 billion acquisition of Wachovia Corp., a golden opportunity that the San Francisco-based bank was able to seize largely because it never got too wild while many of its rivals gambled on exotic lending products.
"Wells Fargo knows how to gather deposits, sell additional products and not make loans to people who can’t afford to pay them back,” said Celent analyst Bart Narter. It sounds simple, but sticking to the banking basics wasn’t standard operating procedure while home prices were soaring in a four-year stretch that ended in 2006. The real estate boom emboldened lenders to lower their standards and offer mortgages that began with abnormally low interest rates before saddling borrowers with payments they couldn’t afford. The aversion to risky loans was instilled by Wells Fargo’s leader for the past decade, Richard Kovacevich, who handed the chief executive reins over to John Stumpf last year. Not that Wells Fargo has remained completely pristine. The bank already has taken a $1.4 billion loss on ill-advised home equity loans and also delved into the dicey subprime market through an arm that caters to consumers with shabby credit records.