TheStreet's Anchor Rhonda Schaffler discusses Wells Fargo's potential expansion.
The financial services and bank holding company, which is known for its retail banking business, has chosen a space for a trading operation to use as a base for a "stealth attack" on the investment banking world, Reuters reports.
The bid for more capital markets business, including advising on deals, security issues and trading derivatives, is possibly a risky move for the bank.
The move could offer lucrative fees if Wells Fargo can pick up business abandoned by rivals following the financial crisis in 2008, but trading brings additional risks and volatility, Reuters noted.
"We're not getting into things that are going to rapidly or dramatically change our business," Jonathan Weiss, who heads Wells Fargo's investment banking and trading division, told Reuters earlier this month, "It's just a consistent, slow build-out. Add a person here, add a person there."
Additionally, billionaire investor Warren Buffett, the chairman of Berkshire Hathaway (BRK.A, BRK.B) announced a 10% stake in Wells Fargo (WFC) in an SEC filing on Monday, RealMoney's Carleton English wrote in an article yesterday.
A stake of 10% in a bank requires a review by the Federal Reserve to make sure the shareholder doesn't exercise a controlling influence, English noted.
(Wells Fargo is held in Jim Cramer's charitable trust Action Alerts PLUS. See all of his holding with a free trial here.)
Separately, TheStreet Ratings Team has a "Buy" rating with a score of B on the stock.
This is driven by multiple strengths, which should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks covered.
The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and attractive valuation levels. The team believes its strengths outweigh the fact that the company has had lackluster performance in the stock itself.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
You can view the full analysis from the report here: WFC