(2 November 2023 – Australia) Wells Fargo has liquidated its local inventory finance business, leaving it with commercial and some investment banking capabilities in the country.
The fourth-largest lender in the United States started finalising outstanding client contracts to liquidate the business in October, people familiar with the decision told The Australian Financial Review.
Wells Fargo has taken steps to cut costs this year as Wall Street banks grapple with heightened expenses such as banker salaries and operating costs.
In corporate and investment banking, Wells Fargo’s global non-interest expenses, which includes salaries, soared to nearly $US2.2 billion ($3.4 billion) for the July-September quarter, from $US282 million a year earlier, the bank revealed in its third-quarter results last month.
Despite the spike in expenses, Wells Fargo surpassed analyst expectations for third-quarter earnings and revenue as higher rates offset a dip in corporate lending. Total revenue reached nearly $US21 billion last quarter, while the $US19.6 billion in revenue was 6.5 percent higher than the third quarter last year.
Declining loan balances, coupled with the need to trim expenses, however, could have contributed to the decision to shed non-core businesses like Australian inventory financing.
Inventory finance typically comprises short-term loans used to purchase goods to sell, or materials and parts used to make companies’ products.
Wells Fargo’s broader asset-based lending and leasing business logged nearly $US1.2 billion in revenue in the third quarter, up from $US34 million a year earlier. The bank’s Australian inventory financing loan book was less than $US100 million; it was unclear how many jobs would be lost.
A spokeswoman for the bank, based in Hong Kong, said Wells Fargo intended to “maintain and continue to serve across the commercial banking and corporate investment bank platforms”.
Unlike its North American peers like Citi or JPMorgan, Wells Fargo does not have dozens of coverage and product bankers who specialise in domestic offerings such as equities and mergers and acquisitions advisory work in Australia. This means it does not compete with Wall Street rivals for market share in local M&A and capital markets league tables.
Instead, the San Francisco-headquartered lender operates through a representative office in Sydney, which works with its investment bankers in Hong Kong and Singapore who do lending, debt capital markets, fixed income and foreign exchange services.
In October, Wells Fargo hired Andrew Galbraith as its chief representative to manage the bank’s affairs in Sydney. He will work with Wells Fargo’s overseas coverage bankers and handle local clients and regulators, an internal memo, seen by the Financial Review, showed.
Mr Galbraith joined the bank after 13 years at ANZ, where he was most recently the head of the bank’s public sector.
He will report to David Ratliff, Wells Fargo’s co-head of corporate and investment banking for Asia-Pacific.
The bank, which acquired GE Capital’s commercial finance platform in 2016, employs about 1500 people across the region.