Wells Fargo & Co. completed one of the biggest systems conversions of its kind last week, melding the trust administration service accounts of its merger partners - the old Wells and Norwest Corp., which bought it.
Also, this week the $222.3 billion-asset company will close, and lay off staff at, one of the two trust headquarters sites it was left with following the merger. The trust business will be centralized in Minneapolis, where Norwest's trust business was based before the November 1998 merger.
Today's Wells (Norwest adopted the name) has 105,000 trust accounts under administration, roughly half from each of the merger partners, but says it has reduced the associated costs by $14 million a year.
As a result of the system intergration, Wells - which has $300 billion of trust assets under administration - has a platform for future growth. Specifically, the banking company expects to use the new system to support smaller trust-service operations from other banks it has acquired.
"We really took our time here to analyze both the old Wells Fargo approaches and the old Norwest approaches," said Jay Kiedrowski, executive vice president of institutional investing, who had worked for the old Wells. "It allowed us the opportunity to choose the best of the breed."
Mr. Kiedrowski said 60 of the 160 employees at Wells' old Malibu trust services will be let go. The company kept the investment management computer system that was in place at its California office but adopted Norwest's system of collecting fees and of backing real estate, mineral, and gas offerings.
Mr. Kiedrowski said a high priority was placed on ensuring that investment advisers could continue to access data from Wells Fargo and Norwest. But "we realized that there were a lot of redundancies in what the two companies were doing," he said. "It was clear there were no positive impact on our customers to have operations repeated."
For shareholders, Mr. Kiedrowski said, the systems integration will have a bigger impact. He said he expects a 20% reduction in operation and system costs. The two trust services groups cost $74 million a year in all to run; the new unified group is expected to cost $60 million to run.
Robert Crudup, an executive vice president with SEI Investments, which handled the technology conversion, said the merger was the largest that the Oak, Pa., investment processing firm had completed. Mr. Crudup, whose firm had handled conversions for Chase Manhattan Corp., First Chicago Corp., BankBoston Corp., Wachovia Corp., State Street Corp., Firstar Inc., and Mellon Bank Corp., said it is important to consider strategy along with technology.
"This is not just a process of taking two databases and slamming them together," he said. "We have to focus more on the big picture: the business conversion and consulting with a bank to determine what is the best for its executives, its employees, and its customers."
Diana Yates, an analyst with A.G. Edwards & Sons Inc. in St. Louis, said the system conversion would go unnoticed by the high-net-worth customers, who see the trust accounts as long-term investments that seldom demand their attention. She characterized the restructuring as a careful centralization of Wells Fargo's trust services.
"Norwest ran a pretty decentralized ship when it came to trust services," Ms. Yates said. "But the customers aren't going to feel the pinch. You aren't going to see fewer trust officers, but you might see some tightening in the back offices and on the asset management side of things."
Mr. Kiedrowski said he hopes to learn from this merger as Wells Fargo prepares for more consolidations. He said he expect Wells Fargo to complete smaller conversions in the next six months with banks in Salt Lake City, Lincoln, Neb., and Anchorage.
"With every conversion we want to do better than the conversion before that," Mr. Kiedrowski said. "We want to get better by taking the best qualities of the banks we are acquiring and applying them to Wells Fargo on the whole."
|Blending trust departments after the Wells Fargo/Norwest merger, produced $14 million of annual savings|
|Investment management system|| |
|Fee collection system|| |