Wells Fargo likely to issue more debt to comply with new rules

The logo on a Wells Fargo bank building is seen in downtown San Diego
The logo on a Wells Fargo bank building is seen in downtown San Diego, California March 18, 2014. REUTERS/Mike Blake

November 21, 2015

(In first sentence, corrects expected debt issuance to $40 billion – $60 billion, not $20 billion – $40 billion)

By Dan Freed

NEW YORK (Reuters) – Wells Fargo & Co will likely need to issue an additional $40 billion to $60 billion of long-term debt to comply with new rules designed to help banks better weather a crisis, Chief Financial Officer John Shrewsberry said on Friday.

The debt issuance would be a relatively small portion of the bank’s liabilities, which stood at $1.56 trillion at Sept 30. Even with the debt issuance, Wells Fargo will be able to post modest growth in net interest income, a measure of profits from lending, in 2016 from 2015, Shrewsberry said.

The issuance will allow Wells Fargo to comply with new rules that aim to ensure that some of the biggest and most interconnected U.S. banks have enough equity capital and long-term debt to withstand crises.

Separately, the bank has developed systems that will allow it to approve consumer loans quickly, to compete more effectively with peer-to-peer lenders like LendingClub Corp,, Shrewsberry said at a conference.

He questioned the “durability” of many consumer loan startups once interest rates and defaults begin to rise and said Wells Fargo was more excited by payment technologies.

Wells Fargo is developing customer authentication technology, he said. Also is in the works are “a series of things that bring us closer to merchants like location-based services,” such as being able to offer a coupon to a customer who happens to be driving past a favorite store.

Asked about acquisitions, Shrewsberry said Wells Fargo was more likely to look at assets than businesses. He said credit card loans are a possible target, but mortgage or auto loans are not, as the bank is already big enough in those areas.

(Reporting by Dan Freed in New York; Editing by Dan Wilchins and Lisa Von Ahn)