Wells Fargo & Company Eyes Top-Five Investment Bank Ranking as Deal Pipeline Hits Record High

Key Points

• Wells Fargo aims to become a top-five investment bank over the next several years, after growing market share from the low 2% range to the low 4% range and adding about 140 managing directors.
• The bank says its deal pipelines are at all-time highs across products and sectors, though it cautioned that market conditions can quickly affect how many deals close. Its corporate and investment banking unit generates roughly $5 billion in quarterly revenue and has a return on tangible common equity above 15%.
• Wells Fargo is expanding institutional financing and cautiously growing commercial real estate lending; management said expected losses on its office portfolio have declined and it has not seen a meaningful increase in expected losses from a recent interest-rate shock analysis.

Wells Fargo & Company NYSE: WFC sees a path to becoming a top-five investment bank over the next several years, as it adds senior bankers and expands financing and trading services for institutional clients, according to Fernando Rivas, CEO of its Corporate and Investment Banking business.

Speaking at the BancAnalysts Association of Boston conference, Rivas said the bank’s investment banking market share has risen to the low 4% range from the low 2% range. He said Wells Fargo is generating about $1.5 billion more in investment banking fees than it did several years ago.

“We think we’ve got pretty clear line of sight to get there over the next several years,” Rivas said of reaching the revenue levels of the fourth- and fifth-ranked banks. He described that as a milestone rather than an endpoint.

Hiring and deal pipelines

Wells Fargo has hired about 140 managing directors into its banking business over the past four years, Rivas said. The additions have included leaders in mergers and acquisitions, equity capital markets, leveraged finance and several industry groups.

Rivas pointed to the bank’s role as one of two lead advisers to Union Pacific on the Norfolk Southern deal and its financing work for Netflix’s acquisition of Warner Bros. as examples of transactions that differed from those Wells Fargo would have handled in the past.

He said investment banking pipelines were at all-time highs across products and sectors, while cautioning that pipelines and the rate at which they turn into completed business can change quickly with market conditions. The bank also intends to continue hiring, he said.

Rivas said the corporate and investment banking unit generates roughly $5 billion in quarterly revenue, with a return on tangible common equity above 15%. He said its relationships include approximately $1 trillion in credit commitments and $400 billion in corporate deposits.

Building institutional markets

Alongside investment banking, Wells Fargo is expanding its institutional markets business. Rivas said the bank has grown financing provided to institutions by more than $100 billion and is investing in research, prime services and electronic trading.

Some fixed-income financing, particularly reverse repurchase agreements, carries low spreads but can provide attractive returns on capital because of its relatively low risk-weighted asset intensity, he said. Prime financing has lower initial returns, he added, because of fixed costs and higher capital intensity when the business is smaller.

Rivas said the initial increase in institutional financing was faster than normal partly because the bank had previously reduced activity while operating under an asset cap. Going forward, he expects gross financing balances to grow faster than net balances as a larger portfolio allows more positions to be offset. Central clearing of Treasury repurchase agreements, expected in 2027, should also have an effect, he said.

Real estate and risk

Wells Fargo is again growing its commercial real estate portfolio on a net basis after deliberately slowing originations in recent years, Rivas said. He said expected losses have declined as the bank has worked through its office portfolio.

A recent analysis of an interest-rate shock indicated some loans could migrate to weaker credit categories, but did not show a meaningful increase in expected losses, based on what the bank currently sees, Rivas said. He noted some stress among hotels built about a decade ago that did not receive investment during the pandemic, but said he did not see a broader trend there.

Asked about artificial intelligence and data-center lending, Rivas said Wells Fargo had not publicly disclosed an AI-specific exposure figure. The bank has assembled a cross-functional team to set underwriting criteria and limits, he said, adding that exposure size is an important protection because the long-term outcome is uncertain.

Rivas also said the bank has grown deposits through changes including more focused corporate banking leadership, client targeting and sales targets. Lower-cost deposits take longer to attract because they depend on winning more payments and fee business, he said.

About Wells Fargo & Company (NYSE:WFC)

Wells Fargo & Company is a diversified financial services company that provides banking, lending, investment, and financial management services to individuals, businesses, and institutions. Its offerings include deposit accounts, residential and commercial lending, credit cards, payments, treasury management, and other banking products.

The company also provides wealth and investment management services, including financial planning, brokerage, advisory, and private banking solutions.

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