NEW YORK, Dec 12 (Reuters) - Wells Fargo, the fourth-biggest U.S. bank, plans to extend its hiring spree in investment banking after new recruits and efforts to grow market share significantly boosted the lender's ranking in mergers and acquisitions.
The momentum in investment banking comes as Wall Street executives express optimism about the outlook for dealmaking, buoyed by a resilient U.S. economy.
It also marks a boon for Wells Fargo, which is pursuing more ambitious goals after being released
by regulators from a punitive seven-year cap on its assets in June, after fixing problems from a fake accounts scandal.
Wells Fargo, not previously seen as a big-hitter in the deals space, climbed to eighth place in the global mergers and acquisitions league table by volume so far this year, from 17th in 2024, preliminary data from Dealogic showed, the biggest jump for any major bank.
It was the first time the lender had placed among the top ten banks in the M&A league tables since Dealogic started gathering the data in 1995.
"We've been on a pace now for three years of hiring dozens of managing directors into the banking business annually and we expect that to continue," Fernando Rivas, Wells Fargo's CEO of corporate and investment banking, told Reuters in an interview.
"Our (deal) pipelines are meaningfully greater than they have been at any point in time in the last few years - part of that is because we're taking market share, part of that is because of what's going on in the markets."
Rivas said the dealmaking environment was supported by high stock prices, low credit spreads, looser policy from the Federal Reserve and a pro-business administration, helping boost investor and boardroom confidence.
Wells Fargo's climb in the league tables was fueled by its participation in some of the most prominent M&A deals this year.
It was among the banks that advised and financed Netflix's bid to buy Warner Bros Discovery's TV, film studios and streaming division for $72 billion. The bank could earn $37 million in advisory fees from the deal, according to LSEG estimates.
The lender also advised rail operator Union Pacific on its purchase of smaller rival Norfolk Southern in an $85 billion deal, on which Wells is set to earn $52.5 million when the deal is completed, LSEG data shows.
"Wells was definitely not really known for investment banking previously, those are huge deals for them," said Sean Dunlop, a banking analyst at Morningstar.
"With the balance sheet of a bank with over $1 trillion in assets, they have the wherewithal to compete for bigger domestic mandates now that the asset cap is lifted, particularly relative to smaller boutiques or mid-market banks."
CEO AIMS TO BECOME TOP FIVE INVESTMENT BANK
Wells Fargo CEO Charlie Scharf has set a goal of becoming one of the top five investment banks. In terms of revenue, Wells Fargo is eighth among global investment banks and sixth in the U.S., Dealogic data shows.
Scharf's aspiration may be tough to achieve in the medium term, but the bank's progress so far has been noteworthy, said Stephen Biggar, an analyst at Argus Research.
"Wells has a strong future in capital markets, with the lifting of the consent order enabling more financing for investment banking clients," he said.
Wells Fargo still lags on the M&A league table based on revenue earned from deals, ranking 20th on that metric. Still, it has been growing its fee pool.
Bigger rival JPMorgan consistently tops the investment banking league table globally, while Goldman Sachs is the leader in M&A.
Scharf has hired several senior executives, including Rivas, from JPMorgan, where he previously was a protege of CEO Jamie Dimon.
Other leadership changes include the hiring of new heads of M&A, sponsors, industrials, technology, media and telecommunications, healthcare, a co-head of leveraged finance, and two new co-heads of equity capital markets.
The company has hired more than 125 managing directors since 2019 across corporate and investment banking, Scharf said after reporting third-quarter profits.
"When we look at the reasons why we think we can compete in the marketplace... we've got this broad set of corporate relationships that we built over a long period of time," Scharf told investors at a conference this week. "It has been a very, very focused effort to look at what strengths Wells Fargo has and what we could build around it."
Wells Fargo's stock has risen almost 32% this year, slightly above the S&P 500 bank index's 29% gain.
(Reporting by Saeed Azhar and Lananh Nguyen; Editing by Nia Williams)
