Rick Robinson

Wells Fargo’s Rick Robinson was in El Paso recently to talk to the bank’s high net-worth clients about the economic and investment outlook for the year ahead.

In this time of economic turmoil, Robinson has some good news and some bad news.

“El Paso is doing well, but the one concern that we have is the cutback in defense spending,” he says.

Robinson, who is based in Scottsdale, Ariz., is senior vice president and the regional chief investment officer for the Wells Fargo Southwest Region, which includes Arizona, Nevada, New Mexico, Texas and Oklahoma.

He’s 49, and has more than 25 years of experience in the financial services industry . He joined the bank in 2002.

A Chartered Financial Analyst, Robinson earned a bachelor’s degree in economics from Columbia University, as well as an MBA from UCLA-Anderson School of Management.

Wells Fargo celebrated its 160th anniversary two weeks ago. It was featured in Forbes magazine last month as “The Bank that Works.”

During the bubble years, Wells Fargo took a different path than many other large financial institutions, actually pulling away from the riskiest subprime mortgages from 2003 to 2006.

The bank lost market share as a result, but in 2011, the bank’s net income jumped 28 percent to $15 billion, on $81 billion in revenue, according to the Forbes story. Wells Fago has a 26 percent share of mortgages and its delinquency rate is 7.6 percent.

In the Wells Fargo building in Downtown El Paso, Robinson sat down with El Paso Inc. and talked about which loans are being made and which are not, competition from local community banks and credit unions, and how Wells Fargo supports El Paso.

Q: The Federal Reserve recently gave passing grades to 15 of 19 U.S. banks that underwent stress tests, and Wells Fargo got a passing grade. What does that mean for consumers?

After the crash in 2008, you started to hear about banks that are too large to fail. The Fed decided to create scenarios to test the banks against future failure – in this case, 13 percent unemployment and a 20 percent drop in economic activity, which is almost what happened in 2008.

What the passing grade means for consumers is that they can have faith in the banks – that they are not going to wake up one morning and find that their bank no longer exists or is bankrupt.

Those banks have strength in their financial balance sheet. In 2008, the banks had about $470 billion in capital, but it’s almost double that now.

Q: Some question the value of the stress tests. Do you think they are effective?

Done properly, yes. Prior to the re-emergence of the Greece crisis, the European authorities conducted a stress test which all the banks passed. Less than seven months later, all the banks were in trouble and interest rates were going up.

But this stress test here in the U.S. was done well and was more rigorous than prior stress tests. The transparency was amazing. I mean, anybody could access the results online and see how their bank did.

Q: Fed chief Ben Bernanke recently said that “frustratingly slow” growth is impeding efforts by banks to make profitable loans. Is lending going to continue to be tight?

It depends on what you mean by “tight.” There has been loan growth. Year-over-year growth in commercial and industrial, or C&I, loans has grown about 10 percent.

If you look at a survey of senior bank officers, it shows that credit standards have loosened for large and mid-sized companies and stayed the same for small companies. So it is frustrating for small companies to get credit.

The ability to get a mortgage loan has also become significantly more difficult. The banks are being very conservative on appraisals and you’ll need to put 20 percent down.

Q: Twenty percent down?

It’s back to the old 20 percent, but what we are seeing is a record number of applications fall out because they couldn’t get the funding once the appraisal comes back.

So back to Bernanke’s comment about the slow growth. The unemployment rate is decreasing slowly and there is a lot of ground to make up. You have consumers deleveraging (paying off debt), and we are about midway through that.

You have governments deleveraging. You have businesses that have cleaned up their balance sheets and, altogether, have almost $2 trillion in cash, but don’t see the economic opportunities out there to spend it.

So when I look at the small business survey, their biggest issue isn’t credit; their concern is revenue top-line growth and the economy.

Q: Are loans for small businesses available?

Credit is available for small firms – you have SBA loans, you have banks willing to do that. What we see overall, though, is demand is not there. When you talk about demand, there are two types.

First, businesses who are in trouble and need a loan – they are not getting those loans. Second, the companies that are on solid footing, but many of those aren’t looking for loans because they don’t see opportunity. You don’t see companies coming and saying they want to build a new plant or hire 15 extra workers.

If you talk to a lot of the investors and small business owners out there, they are not talking about, “If I had more credit I could grow more.” They are talking about, “I need consumers to come in and spend.”

We are going to stick to our very sound credit qualities. We have had one of the better performing portfolios of all the large banks due to our conservative underwriting

Q: Here in El Paso I suspect it might be a little different since local community banks have had record increases in small business lending. Is Wells Fargo facing stiffer competition from community banks and credit unions?

Community banks and credit unions have always been competition for large banks. Whether it is a Citibank, Bank of America, Chase or Wells Fargo, when you are a public firm, your shareholders judge you in a different way.

Smaller community banks are really set up to help small businesses start up and they are not held to the same economic threshold that larger banks are held to. With that said, Wells Fargo does have a commitment to small companies and works with many small companies.

As you mentioned, the El Paso market is different. You didn’t have the housing bubble, so to speak, as much here. And during the Great Recession, the economy didn’t fall as much here. One of the reasons is your major employer here is the military base, which is a very stable influence overall.

As things have straightened out and credit card defaults have hit near record lows again, local banks and credit unions have cash and they need to deploy that cash. So you are seeing them be aggressive in businesses lending.

Wells Fargo also wants that business. There’s room for everybody, and we all play our role.

Q: Locally, how many loans did Wells Fargo close in El Paso last year, totaling how much? How does that compare to the year before?

We do not release loan statistics by market, only as a company. We do release SBA numbers by market. In El Paso, for the most recent government fiscal year, we made nine loans for $30.1 million, putting us in the market’s top 10 in both categories. Nationally, one out of three housebolds banks with Wells Fargo.

Q: You mentioned consumer spending. What is the trend?

We are seeing little signs of hope there, and you are starting to see consumers spend a little more. The business owners we talk to are starting to see a small increase in discretionary spending.

I wouldn’t say, “Wow, happy days are here again, hallelujah” but you are starting to say, “Hey, I see some rays of sunshine. I see some hope.”

Q: What is the economic and investment outlook for the Southwest and El Paso for the year ahead?

My region also includes Arizona and Nevada and those states were kinda ground zero for real estate. They’ve got a long time to recover from that – probably a couple of years out. The outlook for those economies is poorer than the national average.

We expect the U.S. to grow about 2.2 percent this year – not a bad growth rate. But Texas as a whole is doing tremendously. You have some of the best performing cities in the country, led by not only an energy boom but also technology. Dallas is doing phenomenally well. Houston, San Antonio and Austin are too.

El Paso is doing well but the one concern that we have is the cutback in defense spending, which is going to affect Fort Bliss – a major contributor to the economy. We expect that to be a drag, not a tremendous drag, but a drag on the local economy that will hold it back somewhat from the rest of Texas. We see El Paso growing just below the national average.

Q: How concerned are you about those defense cuts?

Very. Whatever happens in the elections in November, it will be interesting to see if the automatic defense cuts get reversed or not.

Q: How much did Wells Fargo give locally last year?

Last year we gave $237,200 in contributions to local organizations in El Paso. We had a total of 375 team members volunteer a total of 5,383 hours. Wells Fargo is committed to the communities that we serve. We give a lot to the local communities that we are in. All of our team members have two days in addition to their vacation days called community service days. They can use those days to volunteer in the community. I don’t know many other companies who do that. We are one of the most charitable companies in America.

Q: The eurozone debt crisis: What are the latest concerns and the impact to investors?

The most frustrating thing to investors about the euro crisis is that it has been going on for two years. People seem to forget about it, then it pops its ugly head back up again. They say they have a resolution, then it takes two months to sign the paperwork to finally get Greece its loan and you thought it was already done.

You already have Greece in a recession for five years and you’re seeing the 4th quarter GDP in Spain and the eurozone slightly negative already. But a lot of that has been built in, and they have taken some very aggressive measures.

That they spent too much money is only one of Greece’s issues. They are not competitive. How do you get trade and manufacturing and jobs there? We joke about Greece and call it the 30-40-50 rule.

You know, you work 30 hours a week, you get 40 days of vacation and you retire at age 50. And they’re surprised the Germans don’t want to pay for that.

Q: What’s your advice for those planning for retirement? Have the rules changed since the Great Recession?

One of the worse things out there is when people say, “This time is different.” Sound strategies have been the same forever. And here’s what they are: You should have a well diversified portfolio and your portfolio should match your time horizon.

The rule of thumb is to take 100 and subtract your age and that’s how much you should have in growth assets, whether its equities or commodities or real estate – something that can grow at a good rate.

The other thing is that you want to be saving early. If someone is young, the best power out there is compound interest. Einstein once said it was the greatest force in nature.

Our recommendation is to have a plan and to map it out. How much are you going to have to save? How much are you going to need to put in your 401(k)?

When you look at the generation that lived through the Depression, all they did was save because they were afraid that it could happen again.

Then we went through an age of consumerism where we borrowed and wanted to spend today instead of saving for tomorrow. These things that were supposed to be safety nets from the ‘30s became entitlements so a lot of people became dependent on them to survive.


E-mail El Paso Inc. reporter Robert Gray at rsgray@elpasoinc.com or call (915) 534-4422 ext. 105.