Perry Pelos is revving it up a notch.

Tapped this year to lead Wells Fargo & Co.'s commercial banking group in the West, Pelos plans to capitalize on Wells' reputation as an aggressive cross-seller. In the wake of last year's Wachovia Corp. acquisition, he plans to widen Wells' product offering to include bond issuances and more trade finance services.

Pelos is aiming this broader menu at business customers with revenues between $20 million and $750 million.

"The merger has enhanced our ability to provide all of the services that a middle-market company needs … because we can now give them solutions" that before "they'd have to go somewhere else to get," said Pelos, whose broad territory encompasses all but the Eastern time zone.

In an interview, Pelos outlined both the opportunities and the challenges for the company's entire middle-market business unit in the weakened economy. He acknowledged looming competitive threats and credit quality problems among those challenges.

But in that characteristic zeal associated with Wells executives, Pelos dwelled on sales potential.

The $1.3 trillion-asset Wells in San Francisco inherited the ability to conduct bond issuances and other offerings through the capital markets unit it inherited from Wachovia in Charlotte, N.C. Wells can also now offer more international trade finance services, such as referring international correspondent banking services to the overseas customers of U.S. importers and exporters. Those complemented Wells' expertise in areas such as agricultural and technology lending.

Wells already offers an average of 7.8 products per middle-market business customer, compared to the typical industry ratio of 4 or 5 products per customer for that market, analysts said.

Pelos said the company's strategy is first offering competitive rates on loans, particularly if customers sign up for other products, at a time when many other banks may be pulling back on lending due to the economy.

"No. 1, you have to have a commitment to use your balance sheet in the middle market — we don't see our role as anything other than a primary source of capital to our customers," Pelos said.

Wells can also cross-sell more products such as treasury and cash management services than its competitors because its bankers typically spend more face time with customers, which usually generates more loyalty, he said.

As more banking companies try to beef up their commercial and industrial lending to offset woes in commercial real estate, Pelos admitted that Wells will increasingly bump up against more competitors. In its Western markets particularly, Wells has a new giant competitor, JPMorgan Chase & Co., which last year bought the banking operations of Washington Mutual Inc.

Pelos believes Wells can withstand the challenge because of its broad presence within its territories. For example, Pelos asserts that Wells is the only big bank that has offices dedicated to middle-market customers in many smaller markets, such as Fresno, Calif., Green Bay, Wis., and Cedar Rapids, Iowa.

The commercial banking group is continuing to open more offices, such as another one in Orange County, south of Los Angeles.

"Quite frankly, it's a higher cost of doing business because we're adding people and renting space, but we really look at that as an investment," Pelos said.

Anthony Polini, an analyst at Raymond James & Associates, said that Wells can compete by increasing its reach at the lower end of the middle-market spectrum, by courting customers who are typically overlooked by the large banks.

Though there might be higher losses in lending to less-established businesses, Wells is "one of the best" at risk-based pricing, Polini said. "If you price it right, that's all that matters at the end of the day."

But like most other banking companies, credit deterioration has eaten into Wells' revenues from middle-market customers.

In the second quarter, revenues from wholesale banking (which includes additional business lines to middle-market customers such as capital markets and insurance services) rose 6.7% from the first quarter, to $5.24 billion. However, a 35% increase in the provision for credit losses within the business line, to $738 million, and a rise in expenses due to higher deposit insurance assessments caused wholesale banking's net income to fall 9.6%, to $1.07 billion.

Wells' nonperforming C&I loans are still increasing. Nonaccruals within the segment rose 74.5% from the first quarter, to $2.9 billion, or 1.57% of total loans.

Pelos said that C&I nonperformers will likely remain elevated, but he could not predict when they would likely peak.

"Even if the economic background doesn't substantially change, we're going to perform pretty well," Pelos said.

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