Wells Fargo to Beef Up Securities Business

Wells Fargo & Co., which stepped away from its conservative roots with its purchase of Wachovia last year, plans to announce that it will expand its securities business. The move comes amid a profit revival on Wall Street.
The San Francisco-based Wells had mostly avoided the investment-banking and capital-markets business that banks such as J.P. Morgan Chase & Co. and Citigroup embraced and instead focused on plain-vanilla banking. It now plans to "grow and invest" in the securities business that it largely inherited from Wachovia, Wells Chief Executive John Stumpf said in a statement to be released Monday.
The business, to be called Wells Fargo Securities, will face off against established rivals in offering merger advice, stock and bond underwriting, loan syndications and fixed-income trading. One factor behind the move is a rebound on Wall Street, where profits are surging as capital markets stabilize and the credit squeeze makes basic investment-banking businesses more lucrative.
The bank also realized Wachovia had some pretty good lines of business that could serve its clients. A Wells Fargo spokeswoman declined further comment.
Its Dec. 31 acquisition of Charlotte, N.C.-based Wachovia gave Wells a bigger platform in those areas. Trading income and investment fees accounted for $3 billion in revenue during Wells' first quarter, or 14% of the total, with about $2.2 billion of that amount contributed by Wachovia.
Wells needs to boost profits to help replenish its equity, hurt by, among other things, a $37.2 billion writedown on a portion of Wachovia's loan book. U.S. stress tests said Wells needed $13.7 billion in additional equity, second-highest among the banks measured. The bank responded by raising $8.6 billion in a stock sale and said the rest will be generated internally.
There were early signs Wachovia's securities business might be sacrificed in favor of Wells's more conservative approach. Wells Chief Financial Officer Howard Atkins said in November 2008 the plan was to downsize "higher risk" portions of the business. In December, Mr. Stumpf said proprietary trading didn't align with Wells's "vision and values."