Wells Fargo creates markets unit as Stumpf takes on Wall Street

Wells Fargo & Co., the biggest U.S. home lender, is restructuring sales and trading operations to form a new markets division at its investment bank as the firm challenges more established Wall Street rivals.

The division will be one of five main units under the Wells Fargo Securities brand and include equity and fixed-income sales and trading, commodities, prime services and futures clearing, the San Francisco-based firm said today in a statement. Walter Dolhare and Tim Mullins will oversee the division and report to John Shrewsberry, 47.

Chief Executive Officer John Stumpf, 59, is seeking to narrow the gap with Wall Street firms including Goldman Sachs Group Inc. and Bank of America Corp. He’s building upon a corps of bankers that joined Wells Fargo after its 2008 purchase of Wachovia Corp.

The investment bank, while still a small part of Wells Fargo, is “an important piece” of the firm’s growth strategy, Joseph Morford, an RBC Capital Markets analyst who has an outperform rating on Wells Fargo shares, said before the announcement. “The trading gains were up in the quarter, and that’s largely related to activity in the investment bank.”

Stumpf and predecessor Dick Kovacevich built Wells Fargo into the fourth-largest U.S. lender by focusing on consumers and avoiding riskier trading and underwriting that felled some of the biggest investment banks. Stumpf told investors in January that he couldn’t “care less” how his firm fares in the ranks of investment banking, preferring to view such services as another product to sell to business customers if they need it.

‘Buy-Side Clients’

“It’s always made sense to think about the future as one where we face off with buy-side clients on a more cohesive basis,” Shrewsberry, head of Wells Fargo Securities, said yesterday in a phone interview. Combining the trading businesses under one roof also will make it easier to comply with new regulations, he said.

Third-quarter net trading gains more than doubled to $529 million from the previous three-month period amid “stronger customer accommodation trading results,” the company said in a presentation. The gains accounted for 5 percent of fee income.

Wells Fargo has advanced 23 percent this year through yesterday, matching the gain of the 81-company Standard & Poor’s 500 Financials Index.

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