February 26, 2012 9:32 pm

Wells Fargo set for further expansion

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Wells Fargo plans to increase the size of its wealth management and insurance divisions through acquisitions as well as buying more assets from shrinking European banks, its chief executive says.

John Stumpf, whose bank’s market capitalisation is bigger than that of any other in the US, told the Financial Times he had “sore toes” from “kicking the tyres” on so many potential deals. But he was determined to keep expanding despite the fact that, since Wells has more than a 10th of all US retail deposits, it is unlikely to be allowed to buy more banks.

“We have 10 per cent of the deposits; we have very little of the wealth,” said Mr Stumpf, as he pledged to increase the size of the group’s wealth management business and “buy opportunistically” in insurance.

The focus on serving wealthier Americans will pit Wells against Bank of America’s Merrill Lynch and Morgan Stanley’s Smith Barney, with their larger network of retail brokers. But with a stronger balance sheet than most rivals, Wells is growing at a time when others are shrinking to try to reach tougher regulatory capital levels and reassure investors.

Wells agreed to buy BNP Paribas’ North American energy business last week, including $9.5bn of loans to oil and gas companies. Last year the California-based bank picked up Bank of Ireland’s asset-based lending business and assets from Allied Irish Bank. This year it has looked at Deutsche Bank’s asset management unit.

Wells executives say they are continuing to examine other potential deals, including more sales from European banks scrambling to improve their balance sheets by shedding assets. But despite being sold by overseas lenders, the assets are almost all US loans.

“We’re basically ‘all in’ in the United States,” said Mr Stumpf. “There is so much business to have right here.”

The US focus has not hurt the bank, which weathered the crisis better than almost all peers. In 2008 snatching Wachovia, the North Carolina-based bank, out of the hands of Citigroup.

Though less known outside the US than some of its peers, Wells overtook JPMorgan Chase last year to become the biggest US bank. It overtook HSBC to become the biggest western bank this year, though it has since handed that title back. In global terms, China Construction Bank and Industrial & Commercial Bank of China are bigger still.

Wells executives believe they will be granted permission by the Federal Reserve next month to distribute more capital to shareholders. Other US banks, notably BofA, have had to concentrate on raising capital ratios by shrinking assets and holding off on dividend increases.

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