Wells Fargo & Company (WFC) is set to increase the number of fund-services clients in Asia by almost 20% annually. This U.S. banking major currently has 20 clients receiving its fund services in Asia, which mostly include single-manager hedge funds, along with traditional, private-equity and hybrid funds.
Asia’s economic growth and rising opportunities for investment have attracted major banks such as HSBC Holdings plc (HBC) and State Street Corporation (STT). Notably, Asia at present contributes 15% to Wells Fargo's global fund services revenues. The bank intends to enhance its operations in the region, primarily Hong Kong, as the market there is believed to have considerable growth potential.
According to Bloomberg, the Asia Pacific region issuers raised $1.8 trillion from bond sales since the beginning of 2012, attributable primarily to low interest rates and narrow credit spreads. The proceeds marked an 18% rise from the amount generated two years back.
Wells Fargo’s fund services unit dates back to Cargill Inc.’s Black River Asset Management LLC hedge-fund division. Since Jan 2007, Wells Fargo’s unit has operated through a Singapore-based office. It was only in Dec 2012 that the banking major announced the opening of an office in Hong Kong.
With the strength of roughly 40 people, Wells Fargo’s unit in Asia provides conventional administration and outsourced middle-and-back-office operations. The company believes that it will have an edge by raising issuances of high-yield bonds as its prospects depend on managing more complex funds like credit and those that involve emerging markets.
We believe that plans of expansion in the emerging markets of Asia will benefit Wells Fargo substantially and help offset the sluggishly recovering domestic economy weighed upon by stringent regulations. Investments in emerging economies will help boost the bank’s top-line growth in the near term.
Wells Fargo currently carries a Zacks Rank #2 (Buy). A better performing bank is BankUnited, Inc. (BKU), which carries a Zacks Rank #1 (Strong Buy).
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