Wells Fargo has confirmed that 15 people have left the bank's public finance division as it adjusts to market conditions and the hiring of a new public finance director.
“We are repositioning the public finance business to gain market share after a strategic review and a change in leadership,” said Gabriel Boehmer, a Wells Fargo spokesman, who said the bank is still hiring to support its strategic goals in the sector.
Stratford Shields took over as head of the Wells Fargo public finance department in November; he previously worked as managing director and Midwest regional manager for RBC Capital Markets.
He replaced Peter Hill, who left Wells Fargo in April 2017 to head a growing public finance department at UBS Wealth Management Americas.
Wells Fargo's larger banking operation has been under a cloud since it came to light in 2016 that bank employees secretly created millions of accounts without clients’ approval.
Its municipal bond business was not part of the scandal but was nevertheless affected by the fallout, as governments like Chicago and New York and states including Ohio, California and Massachusetts announced that they would no longer do business with the banking giant.
The elimination of advance refundings and reduction in long-term new money bond sales, which is impacting the entire sector, is having a bigger impact on the bank's municipal bond side than any fallout from the fake-accounts revelations, Boehmer said.
The bank’s standing among municipal underwriters dropped to eighth in first quarter 2017, as measured by volume, from third place during the same quarter in 2016, according to Thomson Reuters data. For the first quarter of 2018, it remains eighth by volume.
Wells Fargo has roughly 125 people working on the public finance team and 418 people, who work in the government and institutional banking division headed by Phillip Smith that includes public finance, Boehmer said.
Every top shop is looking at some reductions due to the elimination of advance refunding in the federal tax bill, which has resulted in job loss for some people working in quantitative positions, Boehmer said.
Wells Fargo also is actively hiring in three key areas: transportation and infrastructure, affordable housing and healthcare, Boehmer said. By the end of the year, Wells could be up or down 10% from where it started in late 2017, as it continues to hire and recruit new people, he said.
Many of the new hires come from Morgan Stanley where Shields headed public finance for most of his career before leaving for RBC and now Wells Fargo.
Since October, the management hires made by Wells are Paula Dagen, managing director of the Northeast Group from Ramirez & Co.; Chuck Peck, managing director and head of the West and Midwest regions from Morgan Stanley; Randy Campbell, managing director and head of P3 Infrastructure and sports finance from Morgan Stanley; Kevin Hoecker, director in the Midwest region from RBC Capital Markets; and Jim Perry, a managing director in the South Central region from Morgan Stanley.
Longtime Chicago-based public finance banker Lawrence Richardson, a managing director who spent the last 10 years at Wells Fargo, recently retired. Before Wells, he spent the previous 15 at the former A.G. Edwards and Sons Inc.
Richard Baggott, a senior executive recruiter and founder of Denver-based Executive Search Placements, said he knows of 22 Wells Fargo public finance employees who had left the company this year. The number includes bankers, derivatives analysts, associates, a junior trader and vice president, he said.
He called it a “soft layoff,” as most of the people were placed on garden leave, where employees are told to go home and not reach out to clients for 30 to 90 days, but still received pay and benefits.
The accounts scandal in Wells Fargo’s community banking sector and subsequent ban placed by treasurers on underwriting business in several cities across the country – and bans that remain in California, Ohio and Illinois – have made it hard on bankers at the firm, Baggott said.
Wells is not the only bank making reductions in some areas this year.
“There have been quite a few other firms laying people off, but not to the same degree I have seen with Wells Fargo,” Baggott said.
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Corrected May 31, 2018 at 2:26PM: The story was updated to clarify the time period used to compare Wells Fargo's league table rankings.