In an effort to expand its business and augment its top line, Wells Fargo & Company (WFC) is adding jobs both in the U.S. as well as in Asia. Its brokerage unit, Wells Fargo Advisors, is growing its St. Louis office and intends to create 400 jobs in the city, according to a report by the Associated Press.
As per the plan, Wells Fargo will expend about $33 million for refurbishing its downtown St. Louis headquarters. However, the company will receive support from the state. It will get an economic incentive package in the form of $12.6 million in tax credits. Moreover, $540,000 is also being offered by the state in New Jobs Training Incentives.
The 400 jobs will be added in a span of three years. Besides adding jobs, these 400 positions will also result form employees consolidation from other cities including Minneapolis.
Notably, in the past decade-and-a-half, consolidating activities on part of companies resulted in several headquarters moving out of St. Louis. However, the region is still an important place in the financial firms sector.
Increasing Workforce in Asia
Besides boosting its workforce in the U.S., Wells Fargo also intends to augment its staff strength in Asia, according to Bloomberg news. In the next three years, the company plans to augment its workforce by at least 10%. This comes amidst cut down of jobs by a number of its rivals such as Morgan Stanley (MS) and Royal Bank of Scotland Group Plc. (RBS).
While its rivals are either slashing growth or trimming workforce in the region to lower their cost base, Wells Fargo intends to add over 400 jobs for its 4,200 people squad in the region. This would also include about 20 hires in Hong Kong by the end of 2012 and around 15 to 20 in China in the next four quarters.
Wells Fargo’s rivals had significant equity and debt capital markets businesses in the region that are facing slowdowns, and therefore these companies are slashing their jobs. However, compared to its rivals, Wells Fargo is more into the traditional banking business, which is enabling it to more easily stay afloat.
Our Take
Given its diverse geographic and business mix, Wells Fargo stands to benefit from consistent earnings growth. It has achieved the tenth consecutive quarter of growth in earnings by reporting EPS of 82 cents per share in the second quarter of 2012, representing 17% year-over-year growth based on improvements in mortgage banking as well as credit quality.
We believe that workforce expansion in select markets will augment its business and position it better compared to peers. Moreover, strategic acquisitions will help expand the company’s business and improve its profitability. It is also capitalizing on the deleveraging activities of the European banks.
Notably, in recent times, in an effort to boost its subscription finance business, Wells Fargo has agreed to buy WestLB’s $6 billion subscription finance portfolio. Such moves augur well and position the company for better growth in the years ahead.
Wells Fargo currently retains a Zacks #3 Rank, which translates into a short-term Buy rating. Considering the fundamentals, we also maintain a Neutral recommendation on the stock.
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