Everybody has complained about the capital-markets business in the fourth quarter — everybody, that is, except Wells Fargo & Co.

The San Francisco bank is a small participant in trading securities, underwriting offerings and advising on mergers and acquisitions. But it seems small is good when markets are bad.

Wells Fargo continues to catch up with its big-bank competitors in capital markets, but it's unlikely to become a major investment bank because it is more risk-averse and wants to continue to get more business from customers that are already borrowing or do other business with it.

That means it can avoid big trading losses, while even revenue growth that disappears on the income statement of big investment banks looks more impressive at Wells Fargo.

Rivals like JPMorgan Chase & Co. and Citigroup Inc. struggled in the fourth quarter with customers pulling back from issuing stocks and bonds and from trading securities and layoffs. But at Wells Fargo, Chief Financial Officer Timothy Sloan told analysts during a conference call Tuesday, "fixed-income sales and trading investment banking results benefited from improved market conditions" in the fourth quarter.

Capital markets chief John Shrewsberry said in an email to Dow Jones that "the interest rates and commodities hedging businesses have done well toward the end of the year as clients were more interested in hedging risk when there is increased market volatility." And credit trading improved because markets were less volatile than in the previous quarter, he said.

At Citi, fixed-income sales and trading fell almost 60%, and 25% at JPMorgan Chase. Wells Fargo doesn't break out any capital markets revenue or earnings; the bank said revenue in wholesale banking, which includes trading, underwriting, and advisory, rose 5% from the third quarter.

Meanwhile, Wells' brokerage and asset management revenue fell 5% from the third quarter. At JPMorgan Chase asset management revenue fell 13%, and revenue from Citi's share of Morgan Stanley Smith Barney fell 22%.

Wells Fargo is a newcomer to investment banking and, wary of capital markets, got into advisory and trading mainly with the 2008 acquisition of Wachovia Corp., which wasn't particularly big in capital markets either.

But Wells Fargo has since expanded. According to Dealogic, it climbed to No. 8 in the league table of investment banking fees for 2011, from No. 9 in 2010, and improved its market share to 5.1%, from 4.2%.

In several league tables Wells Fargo showed up for the first time in 2011. It ranked ninth in U.S. as book-runner in initial public offerings and 10th in equity-linked deals.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.