| NEW YORK, July 11
NEW YORK, July 11 Wells Fargo & Co is
angling to cash in on the U.S. energy boom, as the
fourth-largest U.S. bank looks for new avenues of revenue growth
to overcome a slump in mortgage lending, its traditional driver
The bank is increasingly looking for lending, investment
banking and investing opportunities in the oil and gas sector.
Unlike many of its divisions, which are primarily focused on the
U.S. market, Wells Fargo's energy unit has expanded
internationally. The bank says it now employs the largest staff
of petroleum engineers of any U.S. bank.
"We have the biggest and most-focused business in that
space," said Chief Financial Officer John Shrewsberry in an
interview, noting that Wells has 400 employees dedicated to
serving energy companies.
Wells Fargo's push into the sector provides a window into
how the San Francisco-based bank plans to make up for the
decline in mortgage income, which plummeted in 2013 as a
refinancing boom came to an end. The bank has said its 89 other
businesses, ranging from auto loans and credit cards to wealth
management and investment banking, would eventually make up for
the lost revenue as the economy accelerates.
"They're out on the sea in their boat and they've pitched
their sails," standing ready to benefit from economic growth,
said Tony Scherrer, director of research at Smead Capital
Management. The Seattle-based investment firm has around $865
million in assets under management and owns Wells shares.
But so far growth has been tepid, with those other
businesses failing to fully offset the decline in mortgages. In
the second quarter, mortgage banking revenue was $1.7 billion,
down 39 percent over the same period last year. Because of the
diminished demand for home loans, both revenue and fee income at
the bank has fallen for four consecutive quarters on a
The energy sector has been one of the brighter spots in the
U.S. economy over the past few years, thanks to the shale oil
and gas discoveries and the fracking boom. It has made millions
for wildcat drillers, mineral-rights holders and oil-and-gas
firms and supercharged economic growth in North Dakota, Texas,
and other parts of the country.
Wells, which has had a presence in energy banking for 40
years, sees that as a unique opportunity for growth.
"We're in the real economy, and there are certain sectors of
the economy that are doing very well. We are a big energy
lender," Wells Fargo Chairman and Chief Executive John Stumpf
said on a Friday conference call with analysts. Stumpf added
that domestic production of crude oil was running at the highest
level in 26 years.
Energy banking revenues have increased at a compound annual
growth rate of 23 percent to $1.04 billion in 2013 from $690
million in 2011. Net income has grown at a similar pace, though
Wells does not break out those numbers.
"We are continuing to invest in the business, and
as we look forward we continue to see this as a major growth
opportunity still, not only for corporate banking but for Wells
Fargo," said Mike Johnson, head of corporate banking, at the
bank's investor day in May.
The bank recently opened a small outpost in Aberdeen,
Scotland to cater to energy businesses working in the North Sea.
It also has a growing footprint in Calgary,
In 2012, Wells Fargo acquired a $3.5 billion portfolio of
energy loans and a team of bankers from BNP Paribas. It has
since increased the number of products that unit's clients used
to 8 from 5 in 2013.
Shrewsberry said many large energy clients have also
recently tapped Wells to handle their wealth management needs.
He declined to give the identity of the clients.
(Reporting by Peter Rudegeair; Editing by Diane Craft)