Wells Fargo shuts Aussie business unit as Wall Street costs bite

afr.com:

Wells Fargo has liquidated its local inventory finance business, leaving it with commercial and some investment banking capabilities in the country.

The fourth-largest lender in the United States started finalising outstanding client contracts to liquidate the business in October, people familiar with the decision told The Australian Financial Review.

Wells Fargo has taken steps to cut costs this year as Wall Street banks grapple with heightened expenses such as banker salaries and operating costs.

Wells Fargo beat analysts’ estimates with nearly $US21 billion in revenue last quarter, but expenses saddled its investment bank. Bloomberg

In corporate and investment banking, Wells Fargo’s global non-interest expenses, which includes salaries, soared to nearly $US2.2 billion ($3.4 billion) for the July-September quarter, from $US282 million a year earlier, the bank revealed in its third-quarter results last month.

Despite the spike in expenses, Wells Fargo surpassed analyst expectations for third-quarter earnings and revenue as higher rates offset a dip in corporate lending. Total revenue reached nearly $US21 billion last quarter, while the $US19.6 billion in revenue was 6.5 per cent higher than the third quarter last year.

Declining loan balances, coupled with the need to trim expenses, however, could have contributed to the decision to shed non-core businesses like Australian inventory financing.

Inventory finance typically comprises short-term loans used to purchase goods to sell, or materials and parts used to make companies’ products.

Wells Fargo’s broader asset-based lending and leasing business logged nearly $US1.2 billion in revenue in the third quarter, up from $US34 million a year earlier. The bank’s Australian