Wells Fargo Sees Its Investment-Bank Fees Rising to Citi's Level

(Bloomberg) -- Wells Fargo & Co. could more than double investment-banking revenue with its existing roster of clients, Chief Financial Officer John Shrewsberry said, which would put it among the biggest global firms in that business.

The unit has the potential to generate as much as $5 billion annually compared with about $2 billion in revenue now, Shrewsberry told investors Wednesday at a conference in New York. That would almost match the $5.1 billion of fees Citigroup Inc. generated in the last 12 months, and would be almost double what Deutsche Bank AG produced.

While Shrewsberry didn’t say how long that growth would take, he said Wells Fargo can achieve it without significantly increasing the size of its balance sheet.

“It’s not like we have to go out and find new customers. We don’t have to wheedle our way into places that we’re not,” he said. “It’s our opportunity to up our presence, up our role, up the quality of the advice that we’re giving.”

Wells Fargo has become more reliant on its wholesale division, which houses the investment and corporate banks, as the retail business has been wracked with a series of scandals over the past year. The San Francisco-based lender generated 45 percent of its profit from wholesale in the third quarter, the highest proportion in at least two years. Earnings from the community bank fell to 48 percent of the total.

‘Clear Vision’

The firm’s third-quarter investment-banking fees climbed 11 percent to $465 million from a year earlier, after advancing 10 percent in the previous quarter. The business generated $1.69 billion last year from underwriting debt and equity offerings, syndicating loans and advising on deals.

The bank last year named Perry Pelos to take over the wholesale division, succeeding Tim Sloan after he was appointed chief executive officer. Pelos promoted Rob Engel and Walter Dolhare to lead the investment bank, and they’ve been busy making changes, including naming co-heads of company coverage and hiring a new deals head for financial institutions.

Shrewsberry, who previously oversaw the investment bank, said Pelos “has a very clear vision of compressing” the division’s business lines to “run together a little more seamlessly.” In a May presentation to investors, Pelos referred to 10 major lines of business in the wholesale bank, compared with the 50 or so the bank highlighted prior to his appointment.

Pelos has “got very ambitious plans for how that all fits together,” Shrewsberry said.

Wells Fargo plans to increase lending to institutional clients who want to borrow against securities by “tens of billions” of dollars over the next year, Shrewsberry said. Banks typically provide lending services to hedge funds and other large institutional customers through their prime brokerage.

The bank’s shares have slid 2.6 percent this year, compared with the 12 percent advance of the S&P 500 Financials Index.

To contact the reporter on this story: Laura J. Keller in New York at lkeller22@bloomberg.net.

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steven Crabill

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