Wells Fargo has always been focused on its domestic US constituency, particularly in its nascent investment banking business. But it is beginning to make its presence felt in European debt capital markets (DCM), most visibly in the primary market for Yankee bonds (US dollar issuance by non-US entities).
Wells Fargo has been a late developer at investment banking, beginning with the bank’s acquisition of crisis-hit Wachovia in 2008. Subsequent attempts to build the investment banking franchise were blown off-course by a 2016 scandal over fake customer accounts, which led to changes in management.
Over the past three years, however, the drive to increase investment banking has been accelerated, and today the financial results of the corporate and investment bank (CIB), led by CIB CEO Jon Weiss, are published separately.
Growth plans
As part of the growth plan, Wells Fargo has made further investments in banking teams in London and Paris. These are targeting corporate and financial institutions group (FIG) clients with products including DCM origination and advisory, syndication and acquisition finance and risk solutions. The bank has no equity capital markets business outside the US.
“Our corporate clients are typically Europe, the Middle East and Africa [EMEA] blue-chip companies with global operations, often with a nexus to the US,” says James Marriott, head of international DCM, EMEA and Asia-Pacific. “In FIG, our historical — and still our main — focus has been on larger banks and insurance companies in EMEA that have been accessing the US dollar market. That is evolving, however.”
We have had the benefit of building a new team focused around what we believe is a strong client-centric strategy.
Mr Marriott, who previously held senior DCM posts at UBS and NatWest Markets, acknowledges that many banks are active in DCM and that the flow business is well-covered, indeed, overbanked. “But we have had the benefit of building a new team focused around what we believe is a strong client-centric strategy,” he says.
One differentiating characteristic is the team’s depth of understanding of its clients, he says. “In international DCM, we’re a small team, but collaborating closely with a deep bench of public and private side partners at Wells Fargo, a large and strongly capitalised global bank,” he says.
The content-led strategy is based on understanding the client in depth, says William Perkins, head of Wells Fargo’s London-based DCM advisory team, which advises clients on capital, liability management, balance sheets and ratings, among other topics. “We invest time to understand their challenges, and develop content and ideas to address those,” Mr Perkins says.
These have been difficult years in which to build an investment banking business, as Mr Marriott points out, with regulatory and interest rate uncertainties, geopolitical upheavals and the recent collapse of both Credit Suisse and Silicon Valley Bank.
“It has been a very challenging environment,” he says. “But through that time we have grown the business significantly.” In 2021, the bank ranked 18th in the issuance of EMEA Yankee bonds. In 2023 to date, it has risen to sixth place, increasing its market share from 2.8% to 5.6%.
The team is well-placed to compete in Yankee business thanks to the scale of Wells Fargo, with its large and deep distribution platform in the US. There, the domestic client relationship network connects it to US corporates which may be thinking about European market access, via so-called reverse Yankee issuance.
Experience counts
A number of senior team members in both London and Paris are experienced FIG bankers, and performance in Yankee issuance specifically for EMEA financial institutions has reflected this. In 2021, Wells Fargo ranked 15th with 2.6% market share. In 2023 to date it has been coming fourth, ahead of Citi and Goldman Sachs, with a market share of 7.4%.
In September, three Dutch banks came to market with Yankee deals and Well Fargo underwrote all three. Rabobank sold $1bn-worth of three-year bonds, while ABN Amro sold $1.75bn-worth of three-year fixed and floating-rate paper.
ING attracted particularly impressive investor demand with a $3bn multi-tranche Yankee senior issue. This consisted of $1.25bn four-year non-call three bond (4NC3) and $1.25bn 11NC10, both fixed-rate, plus a $500m floating-rate note. A rapid bookbuild saw initial price thoughts of T+170 basis points (bps) area, secured overnight financing rate (SOFR) equivalent and T+215bps area, respectively, all tighten, pricing at T+142bps, S+156bps and T+185bps.
Earlier in the year, Wells Fargo was an active bookrunner on a Santander dual-format transaction comprising a US dollar benchmark five-year fixed-rate senior preferred and a 10-year bullet Tier 2. With price thoughts of T+175bps area and T+325bps, respectively, the deal was sized at $1.5bn for the five-year and $2bn for the Tier 2, priced at T+140bps and T+295bps.
In another of this year’s deals, the bank was bookrunner to a $2.5bn multi-tranche Yankee issue from BFCM, part of the Crédit Mutuel alliance. With prices tightening across the board, this was made up of a $1.4bn three-year bond priced at T+130bps, a $350m three-year floating rate note at SOFR+140bps and a $750m five-year element priced at T+155bps.
Other 2023 public FIG Yankees on which the bank has been an active bookrunner include a $2bn issue for NatWest Group in both three years and 10 years, an $1.8bn three-year fixed and floating transaction for Swedbank, and a $1.25bn 4NC3 deal for Nationwide, the UK building society.
This year, Wells Fargo has also been sole dealer on private placements into the US worth a total notional $2.1bn. They included a $750m 3NC2 for ABN Amro, both a $500m and a $450m two-year placement for France’s Groupe BPCE, and a $300m two-year deal for Crédit Agricole.
When it comes to corporate clients, the team is active across all sectors, notes Olivier Gardella, deputy CEO of Wells Fargo Securities Europe and leader of the Paris DCM team. “But the utilities sector is very important to us and, overall, because the green transition drives a lot of capital expenditure and refinancing, energy is a key focus,” Mr Gardella says.
Towards the end of 2022, Wells Fargo had been an active bookrunner on the 12-year green tranche of a three-part Électricité de France (EDF) bond issue. The 12-year tranche outperformed and allowed EDF to print €1.25bn, approaching half of the total €3bn issue.
In May this year, the bank was invited back, this time as global co-ordinator on a three-part Yankee offering for EDF. The French utility’s last visit to the domestic US market had been nearly five years earlier, so the company hosted two days of deal marketing across Europe, Asia and the US.
Five-year, 10-year and 30-year transactions were announced with price thoughts of T+250bps area, T+300bps area and T+340bps area. The response was strong enough for the respective prices to be tightened to T+215bps, T+270bps and T+310bps, with each tranche size set at $1bn.
Favourable conditions
Yankee activity picked up in July this year, when the basis for non-US issuers in US dollars became more favourable. Other corporate deals where Wells Fargo has been an active bookrunner this year include a $2.25bn 10-year Yankee for BP, a $1.5bn five-and 10-year deal for the UK’s National Grid, a $5bn multi-tranche transaction for British American Tobacco and a $3bn multi-tranche transaction for BMW.
Reverse Yankees have included repeat European currency mandates for Fiserv and Realty Income, as well as a £450m seven-year deal for American Honda, the bank’s first sterling deal for this client. The bank has been acting on a growing volume of European currency transactions, including a €750m five-year deal for UK advertising conglomerate WPP, a €500m five-year transaction for Dutch-Belgian retailer Ahold Delhaize, and a €500m eight-year deal for UK transport group Mobico.
It acted on a €600m six-year inaugural transaction for Norwegian upstream energy operator Var Energi, and a €1.35bn dual-tranche offering for Portuguese utility EDP Group.
The Wells Fargo team expects that conditions will continue to facilitate Yankee issuance, and says that its clients trust it to place their paper in the US. “Our clients trust us for absolutely strategic transactions,” Mr Gardella maintains. “That includes jumbo transactions, inaugural transactions and reintroductory transactions, as well as privately placing debt.”
