It's unsurprising that Wells Fargo ( WFC) has decided to embrace Wachovia's investment banking business rather than disown it, given Wells' capital position.
Wells Fargo , as reported by TheStreet.com last week, is fusing Wachovia's underwriting, M&A and other securities operations with legacy businesses in what will be called Wells Fargo Securities . Despite earlier indications that it would sell off some of those businesses, Wells is now seeking to expand its presence in the highly profitable investment banking space. Wells CEO John Stumpf struck a fresh tone in a statement on Monday morning, calling Wachovia's investment banking and capital markets platforms "strong" and "one of the great benefits" of the merger. Stumpf had earlier deemed investment banking as "not compatible" with Wells' "vision and values," but now said the company has "an enormous opportunity to become one of the top customer-focused investment banks in the country." Well, duh. Wells earlier this year was told by regulators after government stress tests that it needed to boost Tier 1 capital levels by $13.7 billion -- more than all but one competitor, Bank of America ( BAC). So far, it has explicitly raised relatively little. Wells has tapped the markets for $8.9 billion in fresh capital, whereas BofA, which needed to raise $33.9 billion, has already exceeded that sum through equity offerings, preferred-to-common exchanges and asset sales. Other companies like JPMorgan Chase ( JPM), Goldman Sachs ( GS) and Morgan Stanley ( MS) have already begun to pay off bailout funds. All four firms are also top players in the investment banking space, now that BofA owns Merrill Lynch.