Wachovia Overview: Prior a buyout offer on October 3, 2008 from Wells Fargo, Wachovia was the fourth largest bank in the U.S., based on assets and including these lines of business:
- Retail Banking
- Commercial Banking
- Financial Advisory Services
- Investment Management
- Investment Banking
Wells Fargo Advisors, formerly known as Wachovia Securities, is the third largest full-service brokerage firm in terms of the number of financial advisors. It is a joint venture between Wachovia (62% owner) and Prudential Financial (38% owner), a 2003 combination of Prudential Securities (formerly Prudential Bache) with Wachovia's own pre-existing securities brokerage subsidiary. In 2008, Wachovia Securities grew substantially with the acquisition of A.G. Edwards. It is headquartered in St. Louis, MO.
Wachovia also owns Evergreen Investments, an investment management firm that offers a range of mutual funds, closed-end funds and separately managed accounts.
Size: Wachovia operates in 21 states, primarily in the east, and in the District of Columbia. These figures are as of June, 2008:
- Employees (Full Time Equivalents) = 120,000
- Financial Centers (Banking Offices) = 3,320
- Dedicated Retail Brokerage Offices = 1,500
- Financial Advisors = 14,600
- Number of Client Relationships = 20 million
- Assets = $812 billion
- Client Assets (Wells Fargo Advisors, formerly known as Wachovia Securities) = $1.1 trillion
- International Offices = 40
Positives: Full-time equivalent employees fell a modest 2,000 (1.6%) from year-end 2007 to June 2008.
The sale of the troubled firm to Wells Fargo is a huge positive, given the latter's strong financial position. The merger creates a nationwide banking and securities brokerage colossus, alongside Bank of America, Citigroup and JPMorgan Chase.
Negatives: Federal regulators have launched investigations into alleged irregularities in the operations of Wachovia Securities. It is too early to tell the potential fallout of these probes.
The deal with Wells Fargo faces some uncertainty, since Citigroup is threatening a $60 billion breach of contract suit since it had struck an agreement to buy Wachovia's banking operations only (and not Wachovia Securities) on September 29, 2008. However, Citigroup had bid only $2.1 billion, versus $11.7 billion by Wells Fargo, and Citigroup was expecting the FDIC to cover loan losses above a given level. Wells Fargo has agreed to assume all Wachovia loan loss risk, without FDIC help. The Federal Reserve gave final regulatory approval to the Wells Fargo offer on October 12, 2008, by which time the all-stock deal had declined in value to $11.7 billion from an original $15.1 billion, after a week of major declines in stock values.
