Wachovia Securities is merging its real estate financial services group into the fixed-income division as part of a broader re-alignment of its entire bond platform by business lines rather than function. The adoption of a model used by many of its more established competitors is a response to the firm's growth over the past several years, says a banker at the Charlotte-based investment bank. Ben Williams, the recently crowned head of the expanded fixed-income division, says the main effect of the move is the integration of structured product origination and distribution.
Jim Pierpoint, a bank spokesman, explains that one goal of the restructuring is to increase corporate investment banking earnings to 23% of the bank's profits in 2005, versus 17% projected this year. A Wachovia banker explains that before the re-organization, the real estate group originated structured products and the fixed-income group sold them; now, "the same people will originate deals, put them in a conduit, market the conduit and do the servicing." The products Williams says will benefit the most from the new synergy are commercial mortgage-backed securities, which, with $3 billion originated last year, make for the bulk of the Wachovia's structured finance business, as well as asset-backed securities, collateralized debt obligations and credit derivatives.
Curtis Arledge, formerly head of fixed-income trading, has been promoted to deputy head of the fixed-income division. An individual familiar with the integration says there is a tacit agreement between Arledge and Williams that Arledge will assume the role of fixed-income head in the summer of 2003, as Williams will be reassigned to take on new responsibilities at a different, undisclosed Wachovia division. Williams declined to comment.
The integration was finalized only last week, with the creation of three new business units. The first unit, interest rate products, includes fixed-income derivatives, Treasuries, agencies, mortgage pass-throughs and OTC options, and will be headed by Thold Gill, the former head of fixed-income derivatives under the old structure. The second unit, credit products, includes corporate bond syndicate, debt capital markets, high-yield capital markets, the municipal group, credit research and money market sales and trading. It will be headed by Ben May, the previous head of fixed-income sales and trading, to whom Arledge used to report. The third unit, structured products, run by the former head of fixed-income structured product trading, Tom Wickwire, a 15-year veteran of the firm, includes real estate capital markets, asset securitization, asset-backed commercial paper, structured product trading, ABS syndicate, CMBS syndicate, CDOS, credit derivatives and whole loan products.