Wells Fargo & Co. is seizing a bigger share of U.S.corporate bond sales, underwriting its highest portion of deals onrecord this year as the bank climbs the ranks after buying WachoviaCorp. in 2008.

Wells Fargo, the fourth-largest U.S. bank by assets, hasunderwritten 5 percent of this year's sales, excluding self-leddeals, up from 3.6 percent in 2009, according to data compiled byBloomberg. The bank has aided borrowers from Clorox Co. to NewfieldExploration Co. in sales of $48.3 billion, ranking it as the eighthmost active underwriter of the debt. That's up from 11th in2010.

The lender has sought to expand its investment banking businessafter acquiring much of the operation from Wachovia. An earlytarget for expansion was debt underwriting, in units frominvestment-grade and high-yield corporate bonds to leveraged loans.The bank has built market share since the financial crisis, takingadvantage of its large deposit base and limited presence inEurope.

“Reputation is as important as it's ever been in that business,”Jennifer Thompson, an analyst at Portales Partners LLC in New York,said in a telephone interview. Wells Fargo “came through thefinancial crisis in very good shape: well capitalized, highliquidity,” she said. “They are probably picking up market sharefrom some other larger entities that maybe have had a toughertime.”

Wells Fargo helped underwrite 4.1 percent, or $29 billion, ofinvestment-grade sales this year, up from 2.5 percent, or $21.2billion, in 2009, according to Bloomberg data. In high- yield, thebank has helped manage 6.7 percent, or $14.3 billion of issuance in2012, an increase from 5.8 percent in 2009, or $9.3 billion.

“It hasn't been an overnight success story; you've seen ourmomentum accelerate,” Gary Wolfe, head of high-yield capitalmarkets at Wells Fargo, said in a telephone interview. “We'restarting to see the fruits of what has been a multi-yeareffort.”

The cost to protect against losses on Wells Fargo's debt is thelowest among its U.S. peers, with credit-default swaps tied to thebank at 76.2 basis points yesterday, compared with an industryaverage of 148 basis points among the six- biggest U.S. banks.

Chairman and Chief Executive Officer John Stumpf, and hispredecessor Dick Kovacevich, built Wells Fargo into one of thelargest U.S. banks by focusing on consumers and avoiding riskiertrading and underwriting, the same businesses that hobbled some ofthe biggest U.S. investment banks during the financial crisis.

Changed Strategy

The bank's strategy changed after it acquired Wachovia inDecember 2008 as the Charlotte, North Carolina-based lender nearedcollapse. Wachovia underwrote 2.6 percent of investment- gradedeals and 2 percent of high-yield transactions in 2008. Wells Fargoexecutives liked what they saw in Wachovia and tapped JohnShrewsberry to oversee an expansion of the investment-bankingunit.

Wells Fargo added a total of 21 managing directors and directorsto the corporate bond team this year, following an addition of 26executives last year, according to John Hines, head of investmentgrade syndicate. San Francisco-based Wells Fargo serves more than70 million retail and corporate customers, Chief Financial OfficerTimothy J. Sloan said Sept. 11 at an investor conference.

The merger “certainly gave the investment bank a chance toexpand its client base,” Hines said. “Over the past four years,we've been rewarded with more book-running roles and been able tobuild on that momentum.”

Still, Wells Fargo ranks seven places behind JPMorgan Chase& Co., the No. 1 underwriter, which has helped sell $118.8billion in debt this year, or 12.3 percent of the market. Bank ofAmerica Corp., ranked No. 2 and based in Charlotte, has sold about$103 billion in bonds for 10.7 percent market share, according toBloomberg data. JPMorgan is based in New York.

Wells Fargo served this week as one of the bookrunners on a $600million offering from Clorox and on a $1.05 billion, three- partsale by Dominion Resources Inc., Bloomberg data show. The bank leda $1 billion debt sale for Newfield Exploration Co. in June.

Wells Fargo is one of the “firmer financials,” said AnthonyValeri, market strategist at LPL Financial in San Diego. “They haveless financial markets exposure, certainly less exposure to Europe,and are better capitalized with a less market-sensitive model.”

The bank's price-to-earnings ratio of 11.6 times compares withan industry average of 14.9 among the largest U.S. banks, Bloombergdata show. The lender holds almost $930 billion in customerdeposits.

“Clients are eager to partner more with Wells Fargo given thestature and financial strength of the company,” Hines said.

Bloomberg News

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