(Bloomberg) — Wells Fargo & Co., rarely seen as a major force in the world of trading and dealmaking, aims to expand its investment bank in coming years.
It’s part of a strategy Chief Executive Officer Charlie Scharf has been developing since taking over the troubled consumer and commercial banking giant 14 months ago from its offices in New York, according to senior executives. The push would take the fourth-largest U.S. bank a step closer to emulating some of its biggest rivals, including JPMorgan Chase & Co., where Scharf spent over a decade before running Visa Inc. and Bank of New York Mellon Corp.
Inside Wells Fargo, managers say they intend to build a more commensurate presence on Wall Street, where the firm ranks a mere ninth in capital markets and deal advisory, by focusing on business lines and industries where it already has credibility. That would translate, for example, to providing more underwriting and merger advice to corporate clients, but also lending to hedge funds looking to ramp up bets.
“We, obviously, on the investment-banking side don’t have the same market share that we have on the commercial-banking side,” Jon Weiss, head of the corporate and investment-banking business, said in an interview. “The opportunity that we have is to narrow that gap.”
Scharf has been running the San Francisco-based company with a mission to overhaul operations after scandals eroded earnings and led the Federal Reserve to slap a cap on the bank’s assets, now at about $1.92 trillion. While he’s made appeasing authorities his top priority, he also launched a deep review of the firm’s units and has begun taking key steps. Some parts of the company, such as its branch network, are being streamlined. Others, like its asset-management arm, have been tagged for potential sale.
But so far executives haven’t detailed their ambitions for the investment bank aside from general comments that it has potential.
The plan now emerging underscores Scharf’s interest in building up, rather than downplaying, that division. The caveat is it will take a few years for the expansion to gain momentum, especially with the asset cap in place.
The CEO began setting the stage last year when he broke the company’s three business lines into five — splitting the investment bank into a division that reports directly to him. He placed Weiss atop the unit. This month, it’s expected to begin publishing standalone results, giving shareholders numbers to assess its progress.
“Charlie wants to evaluate the business and grow the business,” Weiss said. “And that’s new and that’s exciting.” Giving the investment bank a direct line to the CEO’s office — rather than wrapping it into a larger division — had a “huge energizing impact on the entire team.”
Part of the offensive relies on Wells Fargo’s strengths in other areas. The company already runs a powerhouse commercial bank, providing loans and services such as cash management to legions of middle-market companies across the U.S. It’s also the nation’s top commercial real estate lender.
Executives plan to lean harder on those C-suite relationships to win more mandates underwriting sales of bonds and stocks. Operating committee members including Scharf are reaching out personally to company leaders to ensure Wells Fargo is included when they pursue deals, according to people with knowledge of the conversations.
The bank certainly has share to gain: The firm ranked sixth in underwriting U.S. investment-grade bonds last year and seventh in U.S. high-yield bonds, according to data compiled by Bloomberg. It ranked 14th in U.S. equity offerings.
Rivals such as Goldman Sachs Group Inc. are also offering more Wall Street services to middle-market companies. But Wells Fargo believes its longstanding connections to many such enterprises can still give it an edge in landing mandates for capital markets and advisory deals.
Wells Fargo executives also see opportunities to use the bank’s prowess in lending to do more business in markets.
“One area where we note that we are underpenetrated relative to some of our competitors is on the financing front,” Weiss said. “So whether that’s repo financing or equities financing, prime-services-type financing, those are areas that there’s no question we have significant upside in.”
Industry veterans will recognize elements of Wells Fargo’s approach. The company telegraphed similar ambitions more than a half-decade ago. Back then, the lender had just successfully navigated the financial crisis and was churning out record profits as competitors were still retrenching.
JPMorgan CEO Jamie Dimon even publicly predicted to his shareholders in 2014 that Wells Fargo would be “a major investment bank” within five years. Rainmakers at other firms soon began grousing privately that Wells Fargo was bidding more aggressively to win business including underwriting.
But in September 2016, Wells Fargo’s ambitions were tossed in limbo when a series of scandals erupted in its branch network. Congressional hearings and probes proliferated, and in early 2018 the Fed imposed a cap on the company’s assets — essentially limiting Wells Fargo’s growth — until its leadership addresses lapses. Privately, executives expect the firm won’t be able to get the cap lifted until late this year at the earliest.
“All other priorities have taken a back seat to risk and regulatory over the last four years, including whatever priorities the investment bank had,” Weiss said.
Even with the cap in place, managers see ways to earn more from the division. The need for doing so became all the more apparent amid the economic shocks of 2020, as rivals with larger trading operations pulled in billions of dollars in revenue from a flurry of market activity, offsetting their potential losses on loans. Wells Fargo’s stock tumbled 44% over the year, the worst performance among the nation’s largest banks.
Scharf has listed credit cards and wealth management as among other businesses that present opportunities for revenue.
Weiss is also a veteran of JPMorgan, spending 25 years at the firm and its predecessors before joining Wachovia in 2005, just a few years before its sale to Wells Fargo. He eventually rose to lead Wells Fargo Securities, as the investment bank was then known, from 2014 to 2017. The company’s leaders then assigned him to run its wealth and investment-management unit. But when Scharf arrived, he moved Weiss back.
To be sure, Weiss and other senior executives still hit the notes that long accompanied Wells Fargo’s past restraint. Scharf, for example, told analysts in October that the investment bank had been “very smart” in focusing on business lines where it had strengths. The firm likes stability and it won’t pursue growth at any cost, Weiss said in the interview.
“You can grow pretty quickly in investment banking,” he said. “All you have to do is mis-price a bunch of risk and you can grow as fast as you want. That is not what we’re going to do.”
©2021 Bloomberg L.P.
GM to Invest Nearly $800m for EV Output at Ontario Plant – Bloomberg
General Motors Co. will invest nearly $800 million to bring production of the BrightDrop EV600 electric vehicle to its CAMI manufacturing plant in Ontario, Canada.
The investment will convert the factory into a large-scale electric delivery vehicle manufacturing plant to support GM’s timing to deliver the EV600 in late 2021, the company said in a statement. The agreement is subject to ratification with union Unifor and confirmation of government support.
GM on Tuesday announced the creation of a wholly owned company, BrightDrop, last week, with plans to supply battery-powered vans but also offers fleet-management services.
The proposed investment would create Canada’s first large-scale commercial EV manufacturing plant, Ontario Premier Doug Ford and Minister of Economic Development Vic Fedeli said in a statement.
Separately, Ford Motor Co. reached a tentative contract agreement with Unifor in the latter half of last year, including plans to assemble five battery-powered models beginning in 2025 at the company’s Oakville, Ontario plant. The plant was at risk of closing because the Edge sport-utility vehicle made there has an uncertain future.
GM has deep roots in Ontario, having built over 20 million vehicles at its Oshawa plant since 1918. GM said last fall it will invest as much as C$1.3 billion ($997 million) to reopen its assembly plant in Oshawa under a tentative deal with Unifor.
Arizona Coyotes' Investment in Forwards Must Pay Dividends in 2020-21 – The Hockey Writers
It’s no secret that the offense hasn’t been the strength of an Arizona Coyotes team since…. well, ever. The ‘Yotes moved to the Valley of the Sun 25 years ago, and, since then, they’ve scored the second-fewest goals in the league, at 2.58 per game. They finished in the top-10 in goals only once, in 2001-02, and haven’t finished better than 20th in scoring since 2011-12.
Until this organization is able to draft and develop top-tier talent on a regular basis, scoring is likely to be a problem, so they’ll need to continue winning games in the manner in which they did so in 2019-20 – with outstanding defense and goaltending, along with a scoring-by-committee approach at the other end.
These efforts will be bolstered in 2020-21 if the Coyotes’ three highest-paid forwards – Clayton Keller, Phil Kessel, and Nick Schmaltz – are able to help out offensively on a regular basis. Across the NHL, there have been 379 different 60-point seasons from various players throughout the past eight years. Meanwhile, the only Coyotes’ skater to reach that mark since 2011-12 was Keller, in 2017-18. This needs to change in 2020-21, and Arizona’s highest-paid forwards need to be the ones leading the way.
Coyotes Counting on Keller
First and foremost in this group is the 22-year-old Keller, who has just wrapped up his entry-level contract and is now into his eight-year deal with an average annual value of $7.15 million. With the increase in pay comes an increase in expectations and responsibility, and Keller will need to reverse the trend in his play that has emerged over his first three years in the league.
After a breakout rookie season in 2017-18 where Keller posted 65 points, hopes were high that the Coyotes had finally found the game-breaking forward that they’d spent the better part of the prior two decades searching for. However, Keller’s play declined in Years 2 and 3, as he posted 47 and 44 points, respectively, and failed to match the 23 goals or the 42 assists he recorded as a rookie.
With star forward Taylor Hall now playing for the Buffalo Sabres, Keller is expected to lead Arizona’s offense in 2020-21. He’s fresh off of a solid performance in the Edmonton playoff bubble, where he posted seven points in nine games, and he collected two points in Thursday’s opening-night shootout loss to the San Jose Sharks, so there’s reason for optimism here.
If Keller is able to produce consistent offense at even strength and help the team’s power play, the Coyotes should be in good shape and should be in the conversation for the West Division’s fourth playoff spot in May as the season winds down. If not, it could be a long year in Glendale.
Schmaltz, Kessel Must Rebound
While Keller is the main piece of the Coyotes’ forward group, Kessel and Schmaltz are not far behind. Arizona’s second and third-highest paid forwards, respectively, Kessel and Schmaltz had down years in 2019-20, but Kessel’s production was especially concerning.
‘Phil the Thrill’ endured an injury-plagued 2019-20 season, his first in Arizona. His ironman streak is now up to 845 games, but one could argue that he would have been better off sitting for a few games in order to recover from the various ailments he was attempting to play through.
At any rate, Kessel posted arguably his worst season as a pro last year, with just 14 goals and 24 assists, good for 38 points. This came after a three-year run in Pittsburgh where Phil racked up 244 points in 246 games. Obviously, this is a huge drop-off in production. While it’s true that leaving a team with Sidney Crosby and Evgeni Malkin would result in most NHL players seeing a decrease in offensive output, Kessel’s play fell off of a cliff last season in a development that few saw coming.
As with Keller, though, Kessel got out to a good start in 2020-21, scoring the biggest goal of his Coyotes tenure with 3.2 seconds left in the third period on Thursday at Gila River Arena:
When it comes to Schmaltz, the Coyotes are looking for consistency from him this season. Acquired from the Chicago Blackhawks on Nov. 25, 2018, in the trade that sent 2015 third-overall pick Dylan Strome to the Windy City, Schmaltz is in his third year in Arizona. He enjoyed a brief run of success in 2018-19 after coming over from Chicago, posting 14 points in his first 17 games in the desert (a 68-point pace) before going down with a knee injury on Dec. 30, 2018.
Coyotes Need Consistency from Schmaltz
Last year, Schmaltz posted 45 points in 70 games, which is fine and equates to a 52-point pace over a full 82 games, but he was invisible for large parts of the season. In a 16-game stretch between Nov. 7 and Dec. 6, Schmaltz scored only once to go with five assists, while in 18 games from Jan. 7 to Feb. 17, the Madison, WI native endured a seven-game scoring drought while posting just a single goal along with four helpers.
These offensive downturns were offset by two 13-game hot streaks where Schmaltz averaged better than a point per game. From Oct. 10 to Nov. 5, the 24-year-old collected 4 goals and 10 assists, while from Dec. 8 to Jan. 4, Schmaltz scored twice and added 13 helpers, for a combined total of 29 points in 26 contests.
Unlike the rest of his teammates, Schmaltz did not have a chance to build upon his regular-season performance in the Edmonton bubble, as he was the recipient of a questionable hit from noted Vegas Golden Knights’ tough guy Ryan Reaves in an exhibition game between the two Pacific Division rivals on July 30. Schmaltz suffered a head injury on the play and missed both the qualifying round against the Nashville Predators as well as the first-round series against the Colorado Avalanche.
In 2020-21, Schmaltz will need to become a more consistent scorer in order to avoid being labeled as a “streaky” player, as was the case with many Coyotes players in the past, most notably so for winger Radim Vrbata, who was notorious for going long stretches without scoring before coming out of seemingly nowhere to dominate the opposition and light up the scoresheet.
For example, over the final 41 contests of the 2013-14 campaign, Vrbata had a three-game heater where he collected five assists, which was followed by a stretch where the veteran posted six points in 18 games, which was immediately followed by a six-point outburst across four games, which was then followed by a season-ending cold streak with a goal and four assists in 16 games.
In order to live up to his $5.85 million salary over the next six seasons, Schmaltz must avoid becoming just another skilled but streaky NHL forward. Obviously, it’s unrealistic to expect Schmaltz to consistently score 15 points in 13-game stretches throughout the year (as discussed above), but the potential is there for the former first-round pick to be a 60 to 70-point player in the league. It’s why the Coyotes gave him a $41 million contract extension, and it’s time for him, along with Keller and Kessel, to step up and be difference-makers for Arizona in 2020-21.
Turkey announces $18.5 billion public investment programme for 2021 – The Journal Pioneer
ANKARA (Reuters) – Turkey has announced a 2021 public investment programme worth 138.5 billion lira ($18.53 billion), with communication and transportation projects receiving the largest allocation of the investment funds.
The programme, published in the Official Gazette late on Friday, set aside nearly $6 billion for public investments in the transportation and communication sectors in 2021, and another $2.6 billion for education projects. Other investment areas include manufacturing, health, agriculture, tourism and energy.
Under the programme, Turkey’s Transport and Infrastructure Ministry will receive some $2 billion, while the State Hydraulics Works (DSI) will receive $1.8 billion and the Highways Directorate $1.75 billion.
President Tayyip Erdogan, who has been in power for nearly 20 years with five consecutive election victories, had until 2018 enjoyed steady annual growth of around 5% fuelled by cheap foreign credit and “mega projects” ranging from bridges and tunnels to highways, hospitals and other construction.
(Reporting by Tuvan Gumrukcu and Ebru Tuncay; Editing by Kirsten Donovan)
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