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TMFEditorsDesk (< 20)

Wells Fargone?

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9

July 06, 2009 – Comments (3) | RELATED TICKERS: WFC , GS

Fellow Fool Alex Dumortier wrote today about Wells Fargo (NYSE: WFC) taking on Goldman Sachs (NYSE: GS) and the rest of Wall Street -- i.e. it plans to expand the i-banking business it got in its Wachovia acquisition. 

My interest in Wells Fargo was piqued when we heard Buffett declare it his favorite stock at the Berkshire meeting in May.  Today's news gave me pause, though.  Wells is saying that it will focus on the less risky aspects of investment banking (i.e. facilitating deals and trades for its customers, not trading its own book), but that just adds one more cog to an opaque, complicated machine.

Wells Fargo remains on my watchlist, but it's getting dangerously close to my "too hard" bucket. 

-Anand

3 Comments – Post Your Own

#1) On July 07, 2009 at 1:58 PM, TMFKopp (96.24) wrote:

I don't know... if they're really just focusing on IB and sales and trading, it's not all that opaque and could add some nice profits. They already have a dealmaking arm (M&A, capital raising), but they get soundly squashed by everyone else on the street.

Now, if they start in on the prop trading, that's when you run screaming. Goldman Sachs seems to have the magic touch when it comes to prop, but it was attempts to be more like the Golden One that really sent Bear, Lehman, and Merrill on their respective crash courses.

Matt

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#2) On July 07, 2009 at 2:21 PM, TMFEditorsDesk (< 20) wrote:

Matt, 

You bring up a good point about Wells not being able to compete with the others.  Do you think the combined Wells/Wachovia will 1) compete with the Streeters, 2) be a niche player upselling products to current clients, or 3) sink money into a business that won't have the returns to justify the investment?

-Anand 

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#3) On July 07, 2009 at 2:57 PM, TMFKopp (96.24) wrote:

Umm, well if they're relying on the combined forces of WFC and WB to make an IB powerhouse then they're in for a sorry surprise -- neither had a particularly great IB franchise to begin with. However, if they have a plan for bolstering that divisions -- building brand, acquiring top dealmakers, etc -- then they might be on to something.

so:

1) You're not going to see them competing with GS or MS any time soon. BAC and C though? Maybe so.

2) I don't know about niche, but part of their plan could be carving out focus areas in IB. If I remember correctly I think WB had a reasonably strong consumer IB practice.

3) Well, a lot of that depends on how they approach it...

Matt

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