Wachovia Corp. plans to buy a small asset management company, an executive said Wednesday, in a move analysts said was an effort to breathe life into a capital management unit that has delivered lackluster results in the past year.
David Carroll, group head of the Charlotte banking company's capital management group, said at a UBS-sponsored investor conference Webcast from Boston that Wachovia will buy an asset management company with less than $5 billion of assets within a week.
Mr. Carroll said at the conference that Wachovia would buy a large-cap-stock company whose management team has a "sterling" performance record.
Wachovia, which sells its own funds through Evergreen Investments, had $253 billion of client assets under management in the capital management group at Dec. 31, down 1.2% from the year earlier.
"Assets under management have not grown, and revenue from capital management has not grown in the past year," said Richard X. Bove, an analyst at Punk, Ziegel & Co. "Wachovia is moving aggressively to shake up its organization to reestablish itself."
Kevin P. Fitzsimmons, an analyst at New York's Sandler O'Neill, said Wachovia is looking to reallocate the capital it generated from the sale of its corporate trust business to U.S. Bancorp in November. He said Mr. Carroll had spent recent years assessing the bank's asset management business and analyzing which product gaps need filling. The Wachovia executive now is ready to aggressively expand the business, Mr. Fitzsimmons said.
"For the past year or two, Wachovia has been preoccupied with making bank deals," he said. "Now they are looking at all of their options, including nonbank acquisitions."
Mr. Carroll said at the conference that Wachovia is looking to expand its alternative investment menu by adding exchange-traded funds, a real estate fund, and possibly its own hedge fund.
Mr. Fitzsimmons said several acquisition targets could be attractive. "I think there are a number of small to medium-sized firms that could be available and that would find it attractive to be part of a large organization," he said.
Christopher Mutascio, an analyst at Credit Suisse, said small deals would not do much to "move the needle" in terms of assets under management. "These small deals, more than anything, are being done to fill some gaps in Wachovia's product and services platform," he said.
The capital management group still generates only 20% of the company's total revenue, Mr. Mutascio said. By contrast, Mellon's asset management business generates 41% of total revenue.
