Why Wells Fargo speaks softly

Few big banks around the world have managed to shine over the past half-decade as much as Wells Fargo. The former regional player known for its quaint stagecoaches and sweeping Middle American branch network dodged most of the toxic fallout from the mortgage bust. As other banks reeled from bad loans, Wells Fargo grew–and fast, thanks in part to its 2008 acquisition of Wachovia. Today the bank is worth $276 billion, making it the largest in the world by market cap. (J.P. Morgan Chase, the second largest, is worth $217 billion.) Wells is also the country’s No. 1 small-business lender, top mortgage originator, and largest auto lender.

How did the unassuming mid-market player become the globe’s most valuable financial powerhouse? By building steadily on its customer base and limiting risky activities like subprime lending, even when they seemed like easy money in the boom times. That no-nonsense approach may be why Warren Buffett (BRKA)has long been the bank’s largest shareholder.

The strategy has also helped bring 17 straight quarters of earnings growth. No bragging required.

Serious about tradition

Founded in 1852, Wells Fargo is big on consistency. CEO John Stumpf, who grew up on a farm in Minnesota, the second of 11 children, is a 32-year veteran of the company. The average tenure of the operating committee is an extraordinary 27 years. And the company’s headquarters (a long way from Wall Street both physically and metaphorically) are in an old building outfitted with a shabby carpet and ’90s decor. Renovations? “It’s been a while,” says chief administrative officer Patricia Callahan.

Bread-and-butter banking

Its trading arm may be small, but the company excels at traditional banking. In 2012 it originated a quarter of all mortgages in the U.S. Now that the refinancing boom is dying down, Wells is making up the difference with its credit card business (including a recent partnership with American Express) and expanding its wealth brokerage for high-end customers. Offerings from its 90-plus banking segments, from insurance to payroll processing, help it meet shifting customer demand, Callahan says.

The art of the cross-sell

Wells Fargo has a knack for hooking its customers. The average retail client uses not one, but six services offered by the bank (management’s target is eight). Analysts say the bank can’t make acquisitions to expand its branch network without running afoul of regulatory limits on national deposit market share (which is 10%), but it can sell more of its products to current clients. When you’re the banker for a third of the nation’s households, says BMO Capital Markets managing director Peter J. Winter, your best future customers are also your former ones.

This story is from the June 30, 2014 issue of Coins2Day .