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Wells Fargo sees city as ripe for expansion: Commercial banking, capital management key to Indianapolis plan

July 25, 2005

Wells Fargo & Co. took a couple of quiet but important steps earlier this year as part of a plan to build a major presence in the Indianapolis banking and financial services market.

The San Franciscobased corporation in March opened a local Commercial Banking Division headed by longtime banking executive Lex Curry and a capital management office headed by well-known stock manager Tom Pence. The moves, by the nation's fifth-largest bank in terms of assets, are part of a corporate expansion east of the Mississippi River.

Wells Fargo's presence in central Indiana previously was limited to a commercial real estate office and several autofinancing, consumerlending and homemortgage branches. It also owns insurer Acordia Inc., which employs about 30 people locally. Wells Fargo has about 40 retail bank branches in northern Indiana that it picked up in its 1998 acquisition of Minneapolisbased Norwest Corp., but none in the central part of the state.

While local bank branches are likely to appear in the future, the task at hand is to build formidable commercial banking and capital management operations. Curry, who left National City Bank of Indiana for Wells Fargo, is leading the commercial banking effort. The division, comprising 15 employees, has taken space on the 16th floor of the 300 North Meridian Building

"As we continue to gain momentum on the commercial banking front, it certainly makes sense that [opening branches] would happen at some point," Curry said.

Unlike its commercial banking push, which started here from scratch, Wells Fargo's foray into the local capital management arena was bolstered by its acquisition of Wisconsin-based Strong Capital Management Inc.

Pence led Strong's city office and joined Wells Fargo following the asset purchase in late 2004. Pence and his crew of 14 money managers will remain at their location on East 96th Street.

Wells Fargo bought the beleaguered mutual fund company after Strong agreed to pay $140 million and reduce fees to settle SEC charges of improper trading.

Acquisition opens doors

The Strong Capital acquisition took Wells Fargo's total assets under management to $217 billion and made it one of the country's 20 largest mutual fund firms, with $103 billion in mutual fund assets.

Locally, adding Pence to the mix gives the new arrival traction in a competitive market, said Mark Foster, chief investment officer at Kirr Marbach & Co., an investment management firm in Columbus, Ind.

"Wells Fargo has a good reputation and a desire to expand in the money management area," Foster said. "And Tom has a good, long-term track record as a money manager."

Under Strong Capital, Pence and his team had clients nationwide, but few on the West Coast, he said. In the six months since the acquisition, his office has grown assets under management from $1.7 billion to $4.2 billion.

"Wells has created an opportunity to give us a blue-chip name that has opened so many doors for us," Pence said. "[It's] a West Coast firm that has opened up that entire frontier for us."

Pence had been at Conseco Inc.'s capital management division for years but left as its chief equity investment officer in October 2000 to open an Indianapolis office of Strong Capital.

The same year, Bloomberg News ranked Pence's fund the year's top open-end U.S. equity income fund. And Morningstar Inc., a Chicago-based fund research firm, gave the fund its top, five-star rating.

Conseco responded to his departure by suing him in Hamilton County, charging he broke an agreement he signed with Conseco in July 2000, under which he "agreed to organize and operate certain private investment funds."

Pence argued that his agreement had not prohibited him from resigning. He countersued, charging the company defamed him by suggesting in comments to the media that he lacked integrity and had betrayed the company.

A year later, Conseco and Pence dropped their litigation, with neither side paying anything to the other.

Head east

Wells Fargo's commercial banking sector is looking east for its growth. Its arrival in Indianapolis is part of a larger expansion to cities such as Cleveland, Nashville, Boston and Atlanta. Further plans are under way to open in Detroit, Philadelphia, Pittsburgh, Tampa, Baltimore, Long Island and Washington, D.C.

The progression east of the Mississippi River began in 2000, when Wells Fargo launched a commercial banking division in Chicago. The bank now employs 500 in the city and 5,000 throughout Illinois.

Its target market is corporations with annual revenue of at least $20 million, said Curry, a 25-year veteran of the central Indiana banking industry.

The relationships Curry has built during that time are benefiting his new employer. Companies that have followed him to Wells Fargo include Remy International Inc. in Anderson, Wabash National Corp. in Lafayette, and American Commercial Lines in Jeffersonville.

"We go way back with [Curry]," said Tom Snyder, Remy's president and CEO. "But we had to assess the entire bank relationship, and it worked well. Our guys have been very pleased with the services [it] has."

The commercial banking line includes treasury management, private banking, international banking, small-business lending, real estate, equipment finance, institutional trust and merchant services.

Morris Maurer, president and CEO of The National Bank of Indianapolis, said Indianapolis is a very attractive banking market but is overcrowded even without Wells Fargo's arrival.

Curry disagreed.

"We know there's a lot of opportunity here," he said. "From a sheer numbers standpoint, there are a lot of banks. But when you really peel the onion back and look at who has the capabilities and the technology, it's really not that competitive."

Solid performer

Wells Fargo has a stellar reputation on Wall Street. Shares trade above the $60 level, and it is the only bank in the country with a triple A credit rating. In a recent report, Connecticut-based Advest Inc. said the company is "well-positioned to outperform its peers and the broad market by delivering consistently strong growth and profitability that is resistant to changes in the interest rate and economic cycles."

Erika Penala, an analyst who co-wrote the report, said the ultraconservative Wells Fargo is expanding commercial banking operations to test the waters before opening retail branches.

"[It's] a very solid company with a very low-risk profile," Penala told IBJ. "[It's] one of the more consistent performers."

Wells Fargo has $436 billion in assets. It has 3,000 locations in 24 states.
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