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Wells Fargo to buy a Comerica retirement business, regulators asked to raise money after stress test

By Amarendra Bhushan for CEOWORLD Magazine Updated:May 5, 2009

U.S. regulators have told Wells Fargo & Co. to raise more capital after government “stress tests” showed the bank would have trouble surviving a deeper recession, the Associated Press reported on Monday.

The report cited two people familiar with the matter as saying that, The fourth-largest bank Wells Fargo is one of several banks that regulators said would need larger buffers to protect them against possible future losses.

San Francisco bank Wells Fargo & Co. is one of the 19 largest U.S. banks undergoing the government “stress tests,” the result of which is expected to be released on Thursday. The initial stress test results were revealed to the banks last month.

- Wells Fargo has until Tuesday to convince officials the results were mistaken and that the bank does not need to adjust its finances.

- The stress tests of the 19 largest financial firms are a centerpiece of the Obama administration’s plan to stabilize the banks.

- Wells Fargo & Co. is acquiring Comerica Bank’s proprietary retirement services business.

- Comerica Bank’s proprietary retirement services provides record keeping services to 250 retirement plans with nearly 100,000 participants, and manages $3.4 billion of assets.

- Wells Fargo’s own institutional retirement group serves about 3.7 million workers and pensioners and more than 10,000 companies and manages more than $176 billion of assets.

- The transaction is expected to close by the end of June.

- The Treasury Department was scheduled Monday to publicly reveal the results of the stress tests.

- On April 22, Wells Fargo reported first-quarter net income of $3.05 billion, as the acquisition of Wachovia Corp.

- Under the government’s adverse economy scenario, the bank would need to raise from $37.4 billion to $72.2 billion.

- Warren Buffett said he would be buying shares at these prices, overshadowing concern that the stress test is going to force companies to raise capital.

- Buffett, whose Berkshire Hathaway Inc. is the top shareholder of San Francisco-based Wells Fargo.

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