Wells Fargo: A Bank Here to Stay?

Not that it is a secret to anyone here, but since 2008, banks have seemingly got a bad rep. Just go ahead and tell your extended family that you landed a job as a investment banker and prepare yourself for the church-eyed-glares that arise.

But what about Wells Fargo? With more commercial bankers than investment bankers and the largest market capitalization of any American bank, Wells has achieved a somewhat better name amongst the biggest banks. For starters, their delinquency rates on residential and commercial loans are also lower, sometimes much lower, than competitors.

Best of all, they have a CEO in John Stumpf that has Warren Buffett’s corporate governance philosophy written all over him. For instance, when Wells posted a killer profit last quarter, Stumpf was asked about his place among competitors and proclaimed, “I couldn’t care less about league tables, I’m more interested in kitchen tables and conference room tables.” So sorry Vault, but this CEO could care less about your phony rankings.

Something of a Wells Fargo bible is also handed out to each and every one of its employees, and on one of the pages it states “We believe shareholders come last. If we do what’s right for our team members, customers and communities, then—and only then—will our shareholders see us as a great investment”

So what do you say, do you turn down Citi or BoA offer for Wells? Is Wells Fargo here to stay, or is all this just a great PR stunt?

 

I want to be positive and optimistic but when the money starts flowing again (and the public forgets), I think this will change.

The hills are alive with the sound of horsepower! - Jeremy Clarkson
 
Best Response
GameBanker:
Time will tell. IMHO they seem to be positioning themselves for long term success. WF uses their debt business to get their foot in the door for any number of the other products they offer. GS is GS for a reason, but who do you think GS goes to when one of their large cap clients is pursuing a big time LBO and need the $ and need it fast? Probably the WF debt team.

Probably not... could just as easily have JPM, Citi, or BAML underwrite.

 

I think WF has fantastic prospects ahead of it. The fact that they are not dependent on IBD/S&T makes them very desirable as an employer in my eyes, as that likely means my job has a smaller chance of getting axed when the markets are in the crapper (see Citi's earnings ...) Although it is only around 2-3000 people I think, the IB is certainly growing, and prospering. There was an NYT article about Wells' trading gains specifically, how they doubled their revenue etc. These seem to all be very good signs in an environment such as this. Also, they actually seem to be hiring... that is a big plus in my book. I know they pay their analysts pretty well, believe bonuses used to be about street, and probably have remained higher than the class BB's considering their superior earnings position.

 

Wells gets a lot of business and they are great to have in a syndicate, but any of those shops can place debt, it isn't that difficult. What you aren't seeing here is the economics those firms are taking, and this is something that is always lost on kids who have a boner for league tables... A lot of banks CHOOSE not to be LEFT. Why would I want to Lead Left a deal if I can be Right and get identical economics. Wells will be on a lot of those deals with worse economics as Right but they will rarely be Right and command identical economics as some of the other shops will.

 
rufiolove:
Wells gets a lot of business and they are great to have in a syndicate, but any of those shops can place debt, it isn't that difficult. What you aren't seeing here is the economics those firms are taking, and this is something that is always lost on kids who have a boner for league tables... A lot of banks CHOOSE not to be LEFT. Why would I want to Lead Left a deal if I can be Right and get identical economics. Wells will be on a lot of those deals with worse economics as Right but they will rarely be Right and command identical economics as some of the other shops will.

I'm sorry but from someone with a few years of experience in sponsored / leveraged finance I find it difficult to follow your logic.

My points would be as follows:

  1. Banks rarely, if ever, choose joint books on the right with equal economics over lead left. The reasons for this are numerous but they range from client contact (joint books on the right has significantly less input with the client over the course of the transaction) to risk-reducing status as the collateral agent (lead left is often administrative agent) to future economics (lead left for the financing typically a) has most institutional knowledge of the deal and b) is more advantageously positioned for future business e.g. IPO or especially single-bank roles such as advisory). (I could continue on about the benefits of acting as a physical bookrunner in terms of your buyside clientele, trading volume, marketing credibility, etc but I think I have proved my point)

  2. It is relatively uncommon for joint books on the right to maintain equal economics with the lead left

  3. If anything, Wells is most often joint books on the right despite its preference (not because of it) due to the fact that Wells, while having a very strong balance sheet and debt franchise, nonetheless maintains a weaker sales/trading function. This limits Wells' ability to provide aggressive market reads / most efficiently act as the physical bookrunner.

In my opinion, posts like the above go to show that while information on internet message boards can be helpful, you should view unsubstantiated positions with a hint of skepticism, as they are occasionally written spur of the moment and it is difficult to discern whether the author is, in fact, an authority on the subject.

But you will be forgiven because your icon is Rufio.

Also - while we're comparing banks (leveraged finance or financial sponsors) - Wells for sure over Citi, but probably BAML over Wells (Wells paid better this/last year but BAML was on more, bigger deals).

 
Bayside0987:
rufiolove:
Wells gets a lot of business and they are great to have in a syndicate, but any of those shops can place debt, it isn't that difficult. What you aren't seeing here is the economics those firms are taking, and this is something that is always lost on kids who have a boner for league tables... A lot of banks CHOOSE not to be LEFT. Why would I want to Lead Left a deal if I can be Right and get identical economics. Wells will be on a lot of those deals with worse economics as Right but they will rarely be Right and command identical economics as some of the other shops will.

I'm sorry but from someone with a few years of experience in sponsored / leveraged finance I find it difficult to follow your logic.

My points would be as follows:

  1. Banks rarely, if ever, choose joint books on the right with equal economics over lead left. The reasons for this are numerous but they range from client contact (joint books on the right has significantly less input with the client over the course of the transaction) to risk-reducing status as the collateral agent (lead left is often administrative agent) to future economics (lead left for the financing typically a) has most institutional knowledge of the deal and b) is more advantageously positioned for future business e.g. IPO or especially single-bank roles such as advisory). (I could continue on about the benefits of acting as a physical bookrunner in terms of your buyside clientele, trading volume, marketing credibility, etc but I think I have proved my point)

  2. It is relatively uncommon for joint books on the right to maintain equal economics with the lead left

  3. If anything, Wells is most often joint books on the right despite its preference (not because of it) due to the fact that Wells, while having a very strong balance sheet and debt franchise, nonetheless maintains a weaker sales/trading function. This limits Wells' ability to provide aggressive market reads / most efficiently act as the physical bookrunner.

In my opinion, posts like the above go to show that while information on internet message boards can be helpful, you should view unsubstantiated positions with a hint of skepticism, as they are occasionally written spur of the moment and it is difficult to discern whether the author is, in fact, an authority on the subject.

But you will be forgiven because your icon is Rufio.

Also - while we're comparing banks (leveraged finance or financial sponsors) - Wells for sure over Citi, but probably BAML over Wells (Wells paid better this/last year but BAML was on more, bigger deals).

None of what I said was inaccurate so no need for forgiveness.. My shop has certainly on occasion chosen not to push for lead left because we are going to get paid the same on the transaction whether it is left-led on our part or right-led, this allows us to pursue business on the left elsewhere when capacity is constrained, additionally I was not in any way saying that Wells was choosing to be lead right, I meant to imply that other banks, like mine sometimes, do choose this. Wells is not really at the stage where they have the relationships in place to muscle better shops out of Lead left roles if the other banks want them, which was the point of the post, which clearly was missed. It isn't uncommon at all for right and left to have equal economics, I've personally been on probably 5 transactions where the economics were identically or virtually identical 15% vs. 14%. For a 500MM deal if you assume a 2% spread and economics of 15 vs 14, the fee difference would be 100k, which is negligible, so the obvious reason for not more aggressively pursuing lead left on the transaction would be because it isn't worth it monetarily and it wouldn't do anything additional for the relationship. How else would you explain a situation where we have IPO'd a client, been left on almost all of their issuance since, but decide to take right. The answer is because the deal size was smaller, we were engaged on other more important deals for our business, and we were getting paid the same.

So yeah, no forgiveness needed, thanks though.

 

As a former multifamily capital employee of Wells Fargo I can attest to the fact that they pay close to the bottom of the market in their group. I think the idea of a corporate culture is just for show--it's a giant, dispirate company with hundreds of thousands of employees. I had an office, I went in around 8:30 am, left around 6:30 p.m., took a 45-minute lunch, got 15 days of PTO and some decent health insurance. Nothing special, nothing to complain about. They always paid us on time and sent us our W2s for tax season.

This concept of "employee first, shareholder second" sort of belies their reasoning for integrating with Wachovia. The integration was miserable for the employees.

Array
 

In Texas, if I told anyone I got a job as an investment banker, they'd probably slap me on the back jovially and say well damn it son good for you! And when i told my parents, they'd probably go tell every single soul they know and then some and be blabbering about it and making waaaaaay too big a deal out it. Of course this is all theoretical because I'm only a junior in college

"Everything comes to those who hustle while they wait." -Thomas Edison
 
WreckEmFinance:
In Texas, if I told anyone I got a job as an investment banker, they'd probably slap me on the back jovially and say well damn it son good for you! And when i told my parents, they'd probably go tell every single soul they know and then some and be blabbering about it and making waaaaaay too big a deal out it. Of course this is all theoretical because I'm only a junior in college
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If I had asked people what they wanted, they would have said faster horses - Henry Ford
 

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