Wells Fargo touts edge for Asian firms eyeing US

Dollar bonds and hedging tools are part of lender's services to meet demand in region

PUBLISHED : Monday, 23 September, 2013, 12:00am
UPDATED : Monday, 23 September, 2013, 4:03am

Wells Fargo, a San Francisco-based lender vying for the title of world's biggest bank by market capitalisation with Beijing-headquartered Industrial and Commercial Bank of China, is entering the competitive Asian capital markets and asset-management businesses to meet increasing demand from large companies in the region.

Offering US dollar-denominated bonds to Asian corporate customers is one key area the low-profile United States bank is keen on exploring, as well as hedging tools like interest-rate and currency swaps aimed at clients with significant exposure to the US market or those looking to buy assets in the world's biggest economy.

The US bank recently hired veteran banker Mark Jones, formerly UBS' head of fixed income, commodities and currencies sales in the Asia-Pacific region, to fill a newly created position overseeing its investment banking and capital market activities in Asia.

In an interview with the South China Morning Post, John Rindlaub, Wells Fargo's Asia-Pacific region president, said it aimed to leverage its strong balance sheet and global network of more than 2,000 financial institutions, offering cross-selling of products such as asset management, and interest rate and currency swaps to Asian-based multinational corporations that were increasingly interested in US assets.

"Revenue in the cross-selling business will grow faster than in the traditional banking unit, which accounts for about 85 per cent at present," said Rindlaub, adding that the size of the cross-selling arm should be around "one third of overall revenue in three years".

Interest in US assets has grown substantially since mainland meat processor Shuanghui International embarked on a US$4.7 billion acquisition of Smithfields Food, the world's biggest pig and pork producer in what would be the single largest purchase of a US asset by a Chinese firm.

"This is clearly a trend and appetite for US assets has grown," Rindlaub said, adding that demand from China and Japan was vibrant, probably because the two economic giants had a history of buying non-bank assets such as commercial real-estate projects, which provided stable yields and a hedge against inflation.

While the Japanese government continued with quantitative easing, Japanese companies were becoming more aggressive in overseas takeovers, said Rindlaub, who has been working in Hong Kong, the hub of Wells Fargo's Asian business, for almost two years.

He said Wells Fargo was "in the process of developing a merger and acquisition team in the region", reflecting its desire to monetise its edge in the US property market and access to middle-market companies.

"The US economy is still the world's largest economy and it's undergoing a moderate recovery, so I think that is attractive to a lot of different multinationals to either expand their existing operations or to go and start a new activity," he said.

Rindlaub said that while borrowing costs had increased, when inflation and history were taken into account they were still "very attractive". He declined to forecast when the benchmark interest rate would rise because of the US Federal Reserve's now-delayed plans to taper quantitative easing.

The US lender operates 17 core banking businesses in Asia, including treasury and payment services, which should generate a return on equity of 14 per cent, it said.