First Union Corp. will steer resources toward capturing more capital markets business from the New Economy as part of a major restructuring it announced this week.
The Charlotte, N.C., company will do this by paring back other capital markets activities. For example, it will close down its public finance group and substantially scale back fixed-income operations, chief executive officer G. Kennedy Thompson said in a conference call Tuesday.
The broad restructuring, which includes $2.8 billion of charges in the second quarter, mostly related to the closure of First Union's consumer finance company, is meant to get the company more focused on its three main businesses: capital markets, asset management, and general banking.
Asset management is slated for a major buildup, Mr. Thompson said. Though he pledged to stay clear of the megamergers for which his predecessor, Edward E. Crutchfield Jr., was known, "We are interested in brokerage and asset management" firms, Mr. Thompson said.
He added, however, that his company would look for small deals in those segments.
Mr. Thompson, who helped build First Union's capital markets and investment banking units before being named president last year, said during the conference call that he plans to make hires in New Economy research and underwriting
He also said he wants to strengthen the company's private equity business; First Union currently has about $3.3 billion committed to venture capital investments.
Mr. Thompson told listeners not to expect big gains from venture capital activities this year. Several companies in which First Union has investments, he explained, have delayed or canceled initial public offerings, so gains from those investments will be delayed. Also, a number of other investments in its portfolio will not bear fruit for a couple of years.
"We have a trough to get through," Mr. Thompson said.
Several large banking companies, including Chase, are emphasizing the New Economy. First Union is "following the fad," said Lawrence Cohn, an analyst at Ryan Beck & Co.
To improve their chances of successfully courting New Economy players, some banks are setting up shop in and around San Francisco. These include First Union, which signed a lease for four floors in the Embarcadero Center to house members of its capital markets group.
The space can accommodate 300 people, but for now it will be occupied by 30 capital markets employees currently in offices scattered about the Bay area, a First Union spokeswoman said.