Wells Fargo Still Waiting for the Right Deal
By:
TraderMark Wednesday, October 01, 2008 1:08 PM
Keep missing
Wells Fargo (WFC) on dips; one of these days... it will be interesting to see
whose assets they swoop up as the months go by and more banks fall by the wayside. The "state" will surely decide Wells will be one of the ultimate winners. I feel like I am writing this from Moscow...
- Wells Fargo & Co (WFC) Chairman Richard Kovacevich says he feels like a kid in a candy store. But he's taking his time to decide what to buy. "There's going to be a lot of mergers and acquisitions for either good reasons or because people don't have choices," he said.
- The San Francisco-based bank looked at Wachovia Corp (WB) and Washington Mutual Inc (WM) this month, but lost deals to larger rivals Citigroup Inc (C) and JPMorgan Chase & Co (JPM), respectively. Bank of America Corp (BAC) is also getting bigger with its planned purchase of Merrill Lynch & Co Inc (MER).
- Now Wells Fargo is the seventh-largest U.S. bank, passed this month by new bank holding companies Goldman Sachs Group Inc (GS (MS) and Morgan Stanley), and dwarfed by rivals that have grown even larger with opportunistic acquisitions as the credit crisis wreaks havoc on the financial landscape.
- As measured by market value, Wells Fargo remains a powerhouse, worth $124 billion, behind only JPMorgan Chase and Bank of America and ahead of Citigroup.
- Analysts said Wells Fargo will continue to look for opportunities, but is not under pressure to pull the trigger. "I would expect that at some point they would buy something, but I would hope that it would be on Buffett-esque terms, offering them full protection and little if any risk," said Michael Farr, president of investment management company Farr, Miller & Washington. "There is an old expression, 'Don't borrow trouble'."
- Wells Fargo, one of the largest investments of Warren Buffett's Berkshire Hathaway Inc (BRKa), had $609 billion in assets and about 3,300 bank branches as of June 30 concentrated in the western two-thirds of the country. The bank continues to search for acquisition opportunities across financial services -- banking, investments, insurance, mortgage and consumer finance, a spokeswoman said.
- Wells Fargo could look at a bank that would help it move east, but it would likely have to be a company whose stock has come under pressure and so be a bargain, analysts said. "You can get a lot more bang for your buck if you find yourself a bargain," said Bart Narter, a senior analyst at financial research firm Celent. "And there are bargains to be had."
- Possible fits under that criterion could include Ohio-based banks National City Corp (NCC) and Fifth Third Bancorp (FITB), whose shares have been pummeled this year, analysts said. Both banks declined to comment.
- In recent years, Wells Fargo has emphasized organic growth, while also making small purchases. n August, it agreed to buy Dallas-based Century Bancshares Inc, adding 28 branches in Texas and four in Arkansas. The latter will become the 24th U.S. state where it has branches. "I think they are looking at a deal and if they do not see it as enough of a deal they are willing to walk away," said Nancy Atkinson, a senior analyst at independent research firm Aite Group. "Wells is just not feeling tons of pressure.
- Wells Fargo is one of the few remaining U.S. banks seen as strong enough to make large acquisitions. "It's possible that whatever the next one is that comes along, Wells won't find themselves in any kind of a bidding war," Atkinson said. "It would be an expansion only if the price were right."
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