Posted by: Matthew Goldstein on September 29, 2008
Talk about fast transformations. It was only a week ago when Goldman Sachs and Morgan Stanley shed their investment banking skins to become commercial banks in a bid to stem a bloodbath in both firms’ stocks. And now it’s troubled Wachovia’s turn to do a sudden, life-saving metamorphosis.
With the help of the FDIC, Wachovia has converted itself into one of the nation’s largest stand alone asset-management firms. In selling its banking operation to Citigroup for $2.1 billion, Wachovia now becomes a publicly traded brokerage with $1.1 trillion in customer trading accounts and a money-management firm with $243 billion in assets under management. The Charlotte, NC-based firm retains the nation’s third-largest fleet of brokers. Its Evergreen Investments money-management firm is a major operator of institutional money market funds.
Wachovia’s big move into the retail brokerage business began in 2003 when it entered into a joint venture with Prudential Financial, which led to the formation of Wachovia Securities. Last year, the brokerage division got even bigger with Wachovia’s $6.8 billion acquisition of St. Louis-based A.G. Edwards. Prudential still retains a sizeable 28%equity stake in Wachovia Securities. Prudential had no comment.
Of course, it’s not clear how long the slimmed down Wachovia will remain as an independent entity. An asset-manager that’s not weighed down with toxic mortgage-backed securities may be attractive to a firm looking to beef-up its retail brokerage operation.