Wells Fargo aims for big trading gains
I noted recently that Wells Fargo, perhaps the biggest fish in the consumer banking ocean, has designs on more sales and trading capital markets activity.
You can't blame management. The Wachovia deal gave it a platform that it could work with, and it's hard not to be swayed by the revenue boost that such activity has given other banks in the third quarter. It makes sense to diversify the revenue composition a bit, reducing the bank's dependence on consumer and commercial banking.
While some may be skeptical, a Deutsche Bank analyst says that the Wells Fargo Securities unit, based in Charlotte, North Carolina, could double its share of the firm's revenue--moving toward an estimated 10 percent compared to its current 5 percent. For JPMorgan Chase, Bank of America and Citigroup, the comparable percentages are closer to 20 to 25 percent.
Reuters notes that "Wachovia was in the process of building a new headquarters in its hometown of Charlotte, when it was bought. The building was completed and is now known as the Duke Energy Center, but Wells did not decide to build the trading floor until last year. About 1,500 traders, bankers and support staff will start moving into the building from a nearby location in December."
The new unit will not be an instant Goldman Sachs. It will likely attack selective opportunities, perhaps as a SEF, and it recently bought prime brokerage Merlin Securities. It will be interesting to see how fast it can ramp up.
- here's the Reuters article