Financial life in a big town

Might Wells Fargo & Co. marry Wachovia Securities to the brokerage operation of UBS AG?

That possibility arose Tuesday with word that the big Swiss bank was shopping its American wealth management unit around to potential buyers.

Both the New York Post and The Wall Street Journal reported Tuesday that Wachovia Securities had been approached as a merger partner.

A Wachovia Securities spokeswoman declined to comment on "rumors and speculation." Wells Fargo bought Wachovia Corp. in January in a massive bank merger. St. Louis-based Wachovia Securities came with the deal.

Wells Fargo previously said it intends to hold on to Wachovia Securities and keep its base in St. Louis. That hasn’t changed, a Wachovia Securities spokeswoman said Tuesday. Wachovia Securities employes about 4,800 people in metro St. Louis.

The Wall Street Journal said UBS had approached Wachovia Securities and Morgan Stanley last year about buying UBS’ brokerage operation. The Swiss bank also approached Bank of America and J.P. Morgan Chase, the newspaper said, citing anonymous sources.

The New York Post on Tuesday said UBS has held preliminary talks with Wachovia Securities about forging a joint venture.

Wachovia Securities, with 16,000 brokers, is twice the size of UBS’ brokerage unit.

UBS bought its way into the American brokerage business by paying $11.5 billion for PaineWebber in 2000. Now, it is struggling after massive credit-related losses. It received a $60 billion bailout from the Swiss government last fall.

UBS’ wealth management unit is also under federal investigation over suspicions that it helped more than 17,000 people evade U.S. taxes.

The credit crisis has forced even healthy banks to consider shedding side businesses in order to concentrate on the core business of banking, said Michael Flanagan, an independent brokerage industry analyst in Philadelphia cash advance loans. "Both UBS and Wells have reason to reevaluate," he said.

A deal with UBS would place employees on Jefferson Avenue through their third major adjustment in less than two years. Wachovia bought A.G. Edwards, a century-old St. Louis institution, in 2007. Now, those same employees are adjusting to their new bosses at Wells Fargo headquarters in San Francisco.

A merger with UBS "certainly would shake out a fair number of the remaining A.G. Edwards people," said Flanagan. "They’re much more accustomed to the collegial and congenial environment of A.G. Edwards."

Wells Fargo has not chosen a name for the St. Louis unit, and the Wachovia name is still on its headquarters on Jefferson Avenue. "We are still discussing branding for the brokerage firm, and a new name should be announced in the coming weeks," said spokeswoman Teresa Dougherty.

A UBS broker in St. Louis said they’d been told nothing about a potential sale. "The general reaction is complete surprise," he said.

Also Tuesday, Wachovia suspended analyst coverage of dozens of consumer-related stocks after six analysts left the firm. The analysts worked for Wachovia Capital Markets in New York, which is a separate division from Wachovia Securities. Wachovia said it intends to replace the analysts or assign other analysts to cover the companies.

jgallagher@post-dispatch.com 314-340-8390

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French Finance Minister Christine Lagarde said the government will revise its economic forecast to project a contraction this year as another jump in unemployment provided the latest sign the country is sinking into a recession.

“I would be very surprised if we have positive growth” in 2009, Lagarde told reporters today on her way to Lyon, France. She said she would publish updated forecasts in “mid-February” after getting figures on fourth-quarter gross domestic product.

The French economy, Europe’s third-largest, may have contracted 0.8 percent in the fourth quarter, the most since 1974, and may slip into a recession early this year, according to the Paris-based national statistics office, Insee. The government currently forecasts 2009 economic growth of 0.2 percent to 0.5 percent and Prime Minister Francois Fillon told Le Monde daily today that he will cut that outlook, taking into account the “evolution of the situation in the U.S.”

The European Union expects the French economy to shrink 1.8 percent this year, which would be the worst performance since World War II. The recession will push the unemployment rate to 9.8 percent this year and 10 credit score.6 percent next year, according to the EU forecasts.

Lagarde said today that the number of jobseekers in France rose by about 45,000 in December. This represents a 2.2 percent increase, to 2.11 million at the end of the month. France had about 216,000 more jobseekers in 2008 than the previous year. The December increase comes after a 64,000 jump in November, the biggest on record.

‘Big Minus’

The nation’s economic performance in the fourth quarter was a “big, big minus,” Lagarde said on France 2 television earlier today without giving any figures. She wouldn’t make a growth forecast for this year. “The forecasters themselves are so uncertain,” she said.

“The scale and the synchronization of the slowdown worldwide have created a climate that erodes confidence and companies are on alert,” said Laurence Boone, chief French economist at Barclays Capital in Paris. “If the job market continues to deteriorate, there are chances consumer spending will suffer.”

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U.S. regulators moved to guarantee deposits at corporate credit unions Wednesday and inject $1 billion into the umbrella entity for these institutions to offset its losses on securities backed by mortgages.

The National Credit Union Administration’s board said the actions were designed to support a system facing "unprecedented strains on liquidity and capital due to extraordinary market disruptions and the current economic climate."

Corporate credit unions are the retail credit union’s credit union, providing services including lending, and check and payment clearance services.

U.S. Central Federal Credit Union, with 26 corporate credit unions as members, said Thursday it expected a $1.1 billion loss for 2008 due to a decision to write down $1.2 billion in "other-than-temporary impairments" in its portfolio.

The NCUA said in a statement it would issue a $1 billion note to Lenexa, Kansas-based U paydayloans.S. Central to offset the anticipated losses.

In other actions, NCUA said the National Credit Union Share Insurance Fund would guarantee member shares in corporate credit unions through February and will extend the guarantee on a voluntary basis to all corporate credit unions through Dec. 31, 2010.

The NCUA also proposed restructuring the corporate credit union system and said it would declare premium assessments to restore the credit union insurance fund.

The credit union-funded NCUA, with the backing of the U.S. government, operates and manages the fund insuring nearly 89 million account holders in all federal credit unions and the majority of state-chartered credit unions.  

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