A takeover of First Interstate Bancorp by Wells Fargo & Co. would boost the aggressor's shrinking money management business.
Wells Fargo had $184.8 billion in discretionary trust assets under management in 1994, but about $171 billion of that resides in Wells Fargo Nikko Investment Advisors, a unit Wells is about to unload.
Should the merger take place, Wells Fargo would be gaining $18.7 billion in discretionary trust assets managed by Los Angeles-based First Interstate.
The sale of Wells Fargo Nikko to Barclays PLC, announced in June and not yet complete, signaled an exit by Wells from the institutional business - a gap the San Francisco powerhouse could fill through a merger with First Interstate, which places a heavy emphasis on those clients in its trust groups.
Included in the Wells Fargo Nikko sale is Masterworks, a $6.6 billion 401(k) services unit. Meantime, Wells still has its Business Retirement Programs, with $6 billion in assets.
"First Interstate is strong in the employee benefit, small business and middle market that Wells Fargo does not have - particularly with the sale of Wells Fargo Nikko," says Carolyn S. Spitz, a senior consultant at the Spectrem Group. "There is a strong benefit with the departure of MasterWorks."
First Interstate has trust subsidiaries in 11 states, but its California unit is by far the strongest component.
The bank's overall institutional trust business outweighs its personal trust volume, says Daniel J. Wroblewski, a senior vice president of First Interstate Bank of California.
"We're pretty well-rounded,"he asserted. "We have a very comprehensive trust department and we're full-service. We have a very strong and profitable presence in California as well as across the states."
Mr. Wroblewski, who manages business development and marketing in the bank's trust and private client services, would not comment further on the potential Wells takeover and its possible reverberations in his area.
A Wells spokeswoman said it was too early to comment on the trust area pending the possible takeover.
"Don't forget we haven't done due diligence - we have to get a very detailed look at First Interstate's various businesses," she said.
Ms. Spitz of Spectrem believes the combination would increase distribution of Wells investment products, including recently developed institutional wrap accounts and proprietary variable annuities.
"The Stage Coach plays well in the West, and obviously it's going to be very attractive in the marketplace they're buying," Ms. Spitz said.
