Wells Fargo Couldn’t ‘Care Less’ If Investment Bank Climbs League Tables
Wells Fargo & Co CEO John Stumpf
Davis Turner/Bloomberg
“We think of investment banking or capital markets as another product, another arrow we have in our quiver,” Chief Executive Officer John Stumpf said during a conference call yesterday in response to an analyst’s question.
“We think of investment banking or capital markets as another product, another arrow we have in our quiver,” Chief Executive Officer John Stumpf said during a conference call yesterday in response to an analyst’s question. Photographer: Davis Turner/Bloomberg
Jan. 17 (Bloomberg) -- Matthew McCormick, vice president and portfolio manager at Bahl & Gaynor Inc., talks about fourth-quarter results for Citigroup Inc. and Wells Fargo & Co. McCormick, speaking with Scarlet Fu on Bloomberg Television's "InBusiness With Margaret Brennan," also discusses the prospects for bank stocks. (Source: Bloomberg)
Wells Fargo & Co. (WFC) is overtaking competitors in the ranks of investment banking and capital markets, and its leader says he couldn’t “care less.”
“We think of investment banking or capital markets as another product, another arrow we have in our quiver,” Chief Executive Officer John Stumpf said during a conference call yesterday in response to an analyst’s question. “I’m not driven by league tables around here.”
Wells Fargo, the most valuable U.S. lender, is bolstering the investment-banking unit acquired as part of the takeover of Wachovia Corp. in 2008. In interviews and conference calls, executives of the San Francisco-based lender say they will build the business differently than Wall Street rivals, focusing on customers and avoiding some of the industry’s riskier practices.
“We wouldn’t compete for business just to advance in the league tables, which is a business strategy for other firms,” said John Shrewsberry, head of the lender’s investment bank and capital-markets business. “The market-share numbers reflect what’s recently been going on with customers. Where you end up on that list is a byproduct, not an end to itself.”
Even so, the company highlighted a gain in market share when reporting fourth-quarter profit yesterday. The firm reaped 5.1 percent of the U.S. investment-banking fees in 2011, up from 4.2 percent in 2010, Wells Fargo said yesterday in a statement, citing Dealogic data. Fourth-quarter profit rose 20 percent from a year earlier to $4.11 billion.
Capital Markets
The company also said the capital-markets business helped bolster fourth-quarter noninterest income, which climbed 6.9 percent from the preceding three-month period to $9.71 billion. Trading gains fell 19 percent to $430 million from a year earlier.
Wells Fargo advanced 0.6 percent to $30 at 12:45 p.m. in New York trading. The company became the most valuable U.S. bank even after its stock fell 11 percent last year as most rivals declined more. It had a market value of $157.3 billion through yesterday, compared with $132.6 billion for JPMorgan Chase & Co., the biggest U.S. lender by assets.
Wells Fargo is hiring bankers and moving into new business lines. The lender hired about two dozen investment bankers from Citadel LLC in August, and in October it hired Cronin McTigue to head the sales and trading functions of the so-called liquid- products desk, which trades U.S. Treasuries.
Fourth-Quarter Results
Investment-banking hurt fourth-quarter results at other U.S. lenders. Citigroup Inc., excluding its repayment of a government bailout in the last quarter of 2009, joined New York- based JPMorgan in posting its lowest revenue since the height of the 2008 financial crisis as trading slumped. Citigroup said about 25 percent of 5,000 jobs cuts, or about 1,250 people, would come from its securities-and-banking unit.
Figures from the league tables or market-share data may give analysts and investors a way to monitor the unit’s growth. Nancy Bush, an analyst and contributing editor at SNL Financial, a bank-research firm in Charlottesville, Virginia, used the conference call to press Wells Fargo about its expansion plans.
“League tables obviously do not drive that company,” Bush said in a subsequent phone interview. “But here’s the question: For a company like theirs that is primarily a regional bank, albeit one that operates in just about every region of the country, how much capital markets do you need? This quarter they got up to 5 percent. At 10 percent do you then self-identify as a capital markets bank?”
The bank ranked 21st in U.S. mergers and acquisitions last year, advising on 31 deals valued at $27.6 billion, while ranking 12th in U.S. debt underwriting, with 1,824 deals valued at $53.1 billion, according to data compiled by Bloomberg.
“We don’t have a goal saying we want investment banking or capital markets to be X percent of our earnings or our revenue,” Chief Financial Officer Tim Sloan said in a phone interview. “Important for us is don’t look at the league tables and focus on the opportunities where we can gain share and can help customers succeed and then it’ll take care of itself.”
To contact the reporter on this story: Dakin Campbell in New York at dcampbell27@bloomberg.net
To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Rick Green at rgreen18@bloomberg.net
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