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Wells Fargo Looking to Expand
February 27, 2012
[ by Melanie Gretchen ]
With cost cuts and layoffs continuing to dominate the news on Wall Street, Wells Fargo announced plans to expand through acquisitions - specifically in the areas of wealth management and insurance divisions.
CEO John Stumpf referred to the bank's endeavors in a humorous manner, telling FT.com that he had "sore toes" from "kicking the tires" on so many potential deals. Despite such 'physical punishment', Stumpf remains determined to expand - if possible by buying more assets from shrinking European banks.
Limitations On What It Can Buy. With Wells Fargo currently holding more than 10% of all U.S. retail deposits, the bank would not be permitted to purchase other banks - the reason it is looking at other business areas - i.e., wealth management and insurance. The push into those areas also make sense because the bank acknowledges it has very little of the wealth."
While it's possible that Wells Fargo could face stiff competition from BofA's Merrill Lynch and Morgan Stanley’s Smith Barney for American wealth management opportunities, Wells is confident that it has certain advantages over its rivals. For one thing, Wells Fargo has a stronger balance sheet, which enables it to seek out growth; others are in the 'pull back' mode in order to comply with tougher regulatory capital levels and to regain investor confidence. U.S. banks like Bank of America need to raise capital ratios, which they can accomplish by shrinking assets and holding off on dividend increases.
A second advantage for Wells Fargo should take effect next month when Wells executives expect the U.S. Federal Reserve to grant the bank permission to distribute more capital to shareholders. Nothing pleases shareholders more than payouts.
Recent Additions. Last week, the bank agreed to buy BNP Paribas’ North American energy business, including $9.5 billion of loans to oil and gas companies. Last year, Wells Fargo acquired Bank of Ireland’s asset-based lending business and assets from Allied Irish Bank. This year it's eyed Deutsche Bank’s asset management unit.
Concentration on America. Going forward, Wells Fargo will continue to examine other potential deals, including more sales from European banks rushing to improve their balance sheets by shedding assets, firm executives said. Yet, while the sellers are, for the most part, overseas lenders, the assets up for sale are almost all U.S. loans.
Which brings up the suggestion that Well Fargo consider adopting a new slogan: "Where there's a Wells, there's a way!"
For further details, go to [CNBC, 2/27/12].Related Stories: Archive
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