Thoughts on WF’s future coming out of the asset cap
Hi All,
Wondering what your thoughts are on Wells Fargo. I have been seeing more and more about them.
They seem to be starting to make a name for themselves as the new CEO has been putting much more emphasis on the business unit. They seem to be starting to see more M&A activity and mandates in general.
What do you think will happen as the asset cap is lifted in the coming future(supposedly). I personally think this will massively accelerate their growth and the additional lending ability will help them continue to win more mandates and make a name for themselves on the street
Interested to here what y’all have to say
Ex-Wells guy here. They’ll continue to be a balance sheet force, and the end of the asset cap will certainly help them grow their financing capabilities.
I’m not very bullish on their M&A side. M&A is about two things: the rainmaker (relationships), and financing capabilities (aka getting on M&A mandates by basically bribing companies and offering financing while the lead advisor does the heavy lifting). WF’s capabilities on the latter will continue to grow, but that’s not the “good” M&A from a fees perspective or junior experience perspective. The thing about Wells is they really struggle with retaining talent. Their top bankers keep getting poached by other banks, and back in 17/18 there was a huge exodus of rainmakers in Industrials and Tech to Jefferies. A common theme at Wells is bureaucracy and red tape. The top seniors are constantly handicapped by company regulations, compliance, and the office politics and bureaucracy that comes with such a large bank, and as a result many of them choose to leave to a platform where they get more freedom (heard this was a huge reason why the Wells ADG group moved to Jefferies), and I don’t see that changing at Wells over the next few years.
WF’s sponsor relations are also pretty lackluster. WF has always been very conservative with risk and they do very little B-rated financing (almost all of their leveraged loans are BB-rated), so they’re not really a go-to bank for sponsors. Sponsor transactions are a huge part of M&A, and I’d argue that every BB has a good Sponsors team, so I see Wells struggling in this area compared to its future desired competition a lot.
I can see Wells becoming a Citi-lite down the line (no offense to Citi, it’s just I feel like whenever I see them on a deal they’re often not the lead advisor and got on the deal through providing financing, more so than the other BBs), but Wells doesn’t have the reputation, deal making firepower, or sponsor relationships to take on most of the BBs.
Thanks for the detailed response and perspective. I definitely agree that talent retention seems to be a problem. I definitely heard on the tech side how there was the messy exit and the tech enabled team left to build our Jefferies CLT office, and same thing essentially with ADG.
Unfortunate that they have such a hard time retaining talent. On the tech side again it seems like the remaining seniors in some aspects are out of place. The head of TMT I believe is a ABS or some type of purely financing background which seems odd.
Maybe if they can start incentivizing seniors/less regulatory red tape when out of so much scrutiny things might get better
Does anybody know what the implications will be on sales and trading?
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