Wells Fargo bets on Charlotte trading after B of A flees

, Bloomberg


Wells Fargo & Co. is betting its securities business can thrive 600 miles from New York in the same city Bank of America Corp.'s traders largely abandoned.

The first of 900 Wells Fargo employees moved last month into a new space on two floors of a 48-story tower in Charlotte, North Carolina. From their windows they can see the complex a half-mile away where Bank of America built its own state-of-the-art facility less than a decade ago for about 550 traders and investment bankers. Most have since been fired or moved to New York.

Both banks are vying to be winners in bond trading even as margins collapse and rivals such as UBS quit the field. Wells Fargo is out to prove the business doesn't need to be in New York, with John Shrewsberry, president of the firm's securities unit, counting on lifestyle perks, cheaper housing and the San Francisco-based bank's status as a growing company to lure talented people.

"On a day-by-day basis in terms of information flow, it's all electronic, and we're as wired as anyone else," Shrewsberry, 47, said in an interview. "People don't run out of their buildings in downtown or midtown Manhattan and meet in the street to talk about markets."

To build the business, Wells Fargo chief executive officer John Stumpf, 59, is relying on a corps of traders added in the 2008 acquisition of Wachovia Corp. About 1,500 bond-trading and investment-banking employees reside in Charlotte, the 17th largest U.S. city. That compares with about 700 in New York, where the equities business is based. Less than a dozen people were transferred to Charlotte from San Francisco, which houses about 400 securities personnel, said Elise Wilkinson, a Wells Fargo spokeswoman.

New-Carpet Smell

The bank has capacity for about 1,200 traders and support staff in the 70,000-square-foot facility, where a new-carpet smell still permeated the space on a December afternoon. It features more than two dozen 70-inch, high-definition television screens and under-floor cooling with customizable floor vents.

Bank of America moved many traders out of Charlotte, where the entire company is based, after the lender's 2009 purchase of New York-based Merrill Lynch & Co., said a person with direct knowledge of the lender who asked not to be identified because he wasn't authorized to speak publicly. As the business grew more global, it made sense to consolidate in a financial center such as New York, the person said. A small number of traders still work in Charlotte. Kerrie McHugh, a Bank of America spokeswoman, declined to comment.

Culture Clash

The volatile nature of investment banking confounded former Bank of America CEO Kenneth D. Lewis as he tried to build a securities operation. In 2006, his corporate and investment bank posted $6.03 billion in profit, only to see it plunge 91 percent a year later amid $5.6 billion in losses tied to trading and mortgage securities.

"I've had all the fun I can stand in investment banking," Lewis said Oct. 18, 2007. He blamed bad judgment by his traders and announced plans to scale back the business, cutting 3,000 jobs. A year later, Lewis reversed course by agreeing to buy Merrill Lynch for about $50 billion in stock -- only to see some of its top executives and brokers leave as analysts expressed concern about a brewing culture clash.

Wachovia faced its own challenges before mortgage losses forced the sale of the Charlotte-based bank to Wells Fargo in 2008. Wachovia's investment bank was slammed by $1.52 billion in trading-account losses in the first nine months of that year.

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