Wells Fargo’s on a Shopping Spree, Picks up Burdale from Bank of Ireland

December 22nd, 2011 by Trefis Team
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Wells Fargo (NYSE:WFC) announced its decision to acquire Burdale Financial Holdings Limited (Burdale) along with an almost $1 billion loan portfolio of Burdale Capital Finance. [1] Burdale is a fully owned subsidiary of the Bank of Ireland (NYSE:IRE). This acquisition, which comes within a week of Wells Fargo’s announcement of the acquisition of EverKey Global Partners (see Wells Fargo to Acquire EverKey Global Partners) highlights the bank’s focus on expanding its operations through inorganic growth. Burdale will strengthen Wells Fargo’s asset-based lending offerings for its U.S.-based customers in the U.K. as a part of Wells Fargo Capital Finance. The acquisition will notably put it in direct competition with RBS (NYSE:RBS) and Barclays (NYSE:BCS) – the biggest banks in U.K. over asset-based commercial lending.

We maintain a $30 price estimate for Wells Fargo’s stock, and attribute the 18% premium to the current market price to the pessimistic outlook for banking stocks in the wake of economic slowdown and deteriorating European debt crisis.

See our complete analysis of Wells Fargo here

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Burdale provides comprehensive asset-based lending services through its operations in the U.K. and U.S. markets. The Bank of Ireland has been shedding its assets for the larger part of the year, following the acute debt situation in Ireland which also led to the bank having to approach its government for a bailout.

Wells Fargo will reportedly pay the Bank of Ireland €690 million ($899 million) for Burdale, including its $1 billion loan portfolio. The transaction is expected to close early next year, and will allow Wells Fargo to extend asset-based commercial loans to its customers for businesses in the U.K.

As you can see by making changes to the chart above, the deal does not really add much to Wells Fargo’s commercial loan portfolio, which is currently worth more than $155 billion. But we believe that the deal is a step in the right direction by Wells Fargo, as Burdale will help the bank bolster its presence in the U.K.

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Notes:
  1. Wells Fargo Agrees to Purchase Burdale from Bank of Ireland, Wells Fargo Press Releases, Dec 19 2011 [↩]