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Corrected to make clear that fees from the Heinz deal have yet to be recorded
NEW YORK (
Wells Fargo(WFC - Get Report) is now solidly a top 10 player in investment banking, as the unit proves an important source of growth for the mortgage lender.
A 37% rise in revenue from Wells Fargo's investment banking unit proved to be the highest among all of the bank's reported segments, outperforming a slight drop in interest-based income from loans and rising far-faster than fees earned by originating and servicing mortgages.
Overall, the bank reported $353 million in investment banking income for the first quarter, helping to drive a slight year-over-year gain of the bank's fee-based revenue. Wells Fargo reported $10.8 billion in fee based income, a negligible rise from year-ago levels.
Although investment banking income represents just under 2% of the bank's revenue, it indicates Wells Fargo's emergence as a Wall Street player with relationships that can help it steal business from mainstays such as
Goldman Sachs (GS - Get Report) and
Morgan Stanley (MS - Get Report).
The bank also benefited from a deal to advise and finance Berkshire Hathaway and
3G Capital's$28 billion acquisition of ketchup maker
Heinz(HNZ) in February, a deal that will generate significant investment banking fees when it closes, which is expected later in 2013 pending regulatory and shareholder approvals.
Only Wells Fargo and
JPMorgan(JPM - Get Report) were hired to advise and finance Berkshire and 3G's deal for Heinz, which stands as one of the top acquisitions of 2013. In 2009, Wells and JPMorgan played a similarly exclusive role in underwriting financing for Berkshire's acquisition of
Burlington Northern Santa Fe.
Through Buffett's business and the acquisition of
Wachovia Securities in 2008, Wells Fargo appears to be a burgeoning Wall Street player, something that likely is a surprise to the larger banking community.
According to data provider
Dealogic Wells Fargo held a top-10 revenue share in the global investment banking business in the first quarter of 2013, surpassing standalone firms like
Jefferies and international conglomerates such as
Royal Bank of Canada(RBC),
BNP Paribas(BNPPQ) and
On a conference call detailing Wells Fargo's
record $5.2 billion quarterly profit, Sloan referenced a 37% rise in investment banking income as evidence of the bank's diversification and its growth prospects.
Wells Fargo also said on the conference call it would be unlikely to get into the M&A game itself in any mega deals.
The San Francisco-based lender reported better-than-expected earnings of $5.2 billion, on revenue of $21.3 billion, generally beating estimates of $4.75 billion and $21.5 billion respectively.
Adjusted first-quarter earnings of 92 cents a share beat the consensus estimate of 88 cents, according to analyst forecasts compiled by
Wells Fargo shares fell over 1% to $37.15 in Friday afternoon trading.
An earlier version of this article incorrectly assumed Wells Fargo had collected its Heinz related underwriting and advisory fees in the first quarter.
For more on Wells Fargo's record earnings, see why
rising profits are also causing rising earnings pressures-- Written by Antoine Gara in New York