Judging by stock price, Wells Fargo is currently the most valuable bank in the U.S. In April, the San Francisco firm saw net income rise for an amazing 12th consecutive quarter. But beneath the sunny surface, Wells is facing a significant problem: its bread-and-butter mortgage business is no longer the cash machine that it once was.
With the refinancing boom in the rear-view mirror, Wells Fargo saw its mortgage originations fall roughly 58% quarter-over-quarter. The bank recently announced that it’s raising commissions for loan officers in an effort to drum up new business.
Now it’s introducing another strategy – one that has nothing to do with its mortgage business. Wells Fargo is planning a bid to become a much bigger player in the thriving and relatively risk-free asset management game.
The bank will act aggressively on all fronts, according to a new report in the Wall Street Journal. That means acquisitions, bigger sales targets in the U.S. and building a larger sales force overseas. The initiative even has a rather blunt internal nickname: "Big Hairy Audacious Goal.” Specifically, Wells wants to double to $1 trillion its assets under management over the next decade, according to the report.
Other than physically growing the size of its workforce, Wells Fargo will also make several strategic changes – many that already appear underway. They are targeting a greater number of institutional investors – like pension funds – and considering expanding into exchange-traded funds.
The idea to concentrate more resources on money management is not a new one on Wall Street. As large U.S. banks pull away from riskier business units like sales and trading, many are doubling their efforts in asset and even wealth management.
Goldman Sachs’ investment management business, a unit that took a beating during the financial crisis, just crossed the $1 trillion threshold itself, receiving $61 billion in net long-term inflows in the first half of the year. J.P. Morgan has done even better.
Now it’s Wells Fargo’s turn.
PwC Ban May Start Consulting Poaching War (eFinancialCareers)
PricewaterhouseCoopers’ financial advisory unit has been hit with a two-year ban on certain consulting assignments. The action will open up a “hunting season” of sorts on PwC consultants, with other Big Four competitors doing much of the poaching.
Cantor Fitzgerald Making Loud FX Push (eFinancialCareers)
With larger investment banks pulling resources from fixed income teams, brokerage Cantor Fitzgerald is remaining aggressive. The New York firm hired two foreign exchange sales and trading execs this week and has signaled that it’s willing to add more talent in the coming months.
Pimco Makes Equities Hires (Reuters)
Pimco is serious about its equities push. The bond giant just added four executives to its global equities teams – two in California and two in London. The firm will likely hire several more equities staffers in the coming months as it builds out its fixed income alternative.
Montag Takes Both Reins at BofA (Bloomberg)
Thomas Montag, the Bank of America executive who has taken home a bigger paycheck than CEO Brian Monynihan for four straight years, might just do it again. The former Goldman Sachs trading head has been named the bank’s sole chief operating officer. Montag has shared the role for several years with David Darnell, who has been named vice chairman.
RIP (Boston Globe)
Corey Griffin, a 27-year-old Bain Capital manager who was instrumental in launching the now-viral ice bucket challenge that raises money and awareness for ALS research, died over the weekend in a diving accident in Nantucket.
It Won’t Rain Dollars Forever (Bloomberg)
HSBC Chairman Douglas Flint is the first person on Wall Street to say something that likely many are thinking: spending on compliance and internal controls is getting a little ridiculous. Banks were underprepared and were under-spending, and now they’re playing “catch-up,” he said. The industry will find a middle ground eventually, Flint suggested.
Deutsche Begins Controls Push (FT)
Deutsche Bank has hired a new chief information officer for the Americas as it looks to beef up its internal controls. Deutsche plans to hire as many as 500 new IT and controls employees in the U.S.
Buzz Around the Office
Mr. Roboto (NY Post)
Here’s a video of Republican Senator John McCain doing the robot with actor Jamie Foxx. It’s weird and not particularly good, but for some reason you can’t look away.
Quote of the Day: “The best advice I've ever received is, 'No one else knows what they're doing either.’” – Ricky Gervais