Wells Fargo aiming to build investment bank

There's long been debate about whether there are true synergies between investment banking and commercial banking. There was a time when investment banks feared that commercial banks in the post-Glass Steagall would steal customers. That didn't really pan out.

Lately, after the mortgage implosion, the debate has resumed. Some maintain that operating a commercial banking base has a lot of balance sheet and capital advantages.

At Wells Fargo (NYSE: WFC), the brass has apparently decided that the synergies between the two are compelling, if only to diversify its revenue. Just two years ago Wells Fargo was cutting back, now it "is hiring new employees and even rehiring former Wachovia staff for select positions within its investment bank," reports Reuters. In particular, it is expanding its mortgage-related derivatives sales and trading units.

"Jumping into investment banking, particularly at a time when regulatory costs are surging and capital markets are still volatile, is a move that some investors may see as out of character for Wells Fargo," reports Reuters. But the bank apparently sees higher growth. Hopefully, it will bring a disciplined approach to the business. I could see Wells Fargo as a mid-market powerhouse.

For more:
- here's the article

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