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Wells Fargo Making Waves on Wall Street (Update 1)

Adds a response from a JPMorgan spokeswoman in 14th paragraph.

NEW YORK ( TheStreet)-- Wells Fargo (WFC - Get Report) is quietly sneaking its way into the deal making and trading businesses, showing impressive growth amid the struggles of industry leaders like Goldman Sachs (GS - Get Report)and JPMorgan Chase (JPM - Get Report)

Loan syndication at Wells Fargo jumped 72% from the first quarter to the third quarter of this year, while rising just 4% industry-wide, according to a report by JPMorgan analyst Vivek Juneja. Wells Fargo only discloses trading gains while keeping quiet on revenues, but Juneja estimates trading revenues of $700-$900 million per quarter in the first two quarters of 2011.

In fact, Juneja's report describes investment banking and capital markets as the fastest area of revenue growth at Wells Fargo. Wells CFO Tim Sloan disputed this point in an interview, but said the business is growing "quite nicely."

While Wells had traditionally shunned investment banking and trading, it acquired a sizeable presence in those businesses with the purchase of Wachovia in 2008. Two legacy Wachovia executives, former JPMorgan investment banker Jonathan Weiss and former Gleacher & Co. (GLCH) dealmaker Rob Engel, now run the business for Wells. Wells also added 25 investment bankers from Chicago-based Citadel in August.

Wells Fargo plans to add other product capabilities, including prime brokerage, and will need to expand its derivatives business to help clients with hedging, according to JPMorgan's report.

Sloan says Wells will pick its spots. The bank already had a presence in the interest rate and energy derivatives businesses prior to acquiring Wachovia and continues to see opportunities in those areas. However, Sloan says the bank is "not a big player" in the credit default swaps market "and candidly don't see that as a big growth opportunity for us."

Despite Sloan's vow that the bank will proceed with caution, the growth is not without risks. Investment banking and capital markets have been volatile businesses for the largest players. Investment banking fees at Citigroup (C - Get Report), Bank of America (BAC - Get Report), JPMorgan, Goldman Sachs and Morgan Stanley (MS - Get Report) are down 36% versus a year ago, according to Deutsche Bank research. Trading revenues, while potentially far more volatile, are up just 2% over that time at the five banks.
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