When Wells Fargo (WFC) dived in and broke up a government-backed bid by Citigroup (C) for teetering Wachovia last fall, it seemed like a logical move. Buying Wachovia would give Wells a coast-to-coast branch network and make it one of the biggest banks in the country.

But what would happen to Wachovia's investment bank? Though it was far from a major player on Wall Street, Wachovia's debt and equity underwriting and merger advisory businesses were all among the top 20 in the country by deal value when it was acquired. But Wells Fargo wasn't interested in competing in those areas then. Now, it seems to have changed its mind.
Both The Wall Streeet Journal and The Charlotte Observer are reporting that Wells Fargo is going to announce plans this morning to make a big investment in Wachovia Securities. The bank plans to "grow and invest in the business," CEO John Stumpf said in the statement.

It could be a lucrative move. As the Journal points out, Wells made $3 billion in trading income and investment banking fees in the first quarter, with Wachovia's operation contributing nearly three quarters of that.

On the other hand, Wachovia needed rescuing in no small part because of losses generated by its investment bank. Wells has been aggressive about writing down the toxic investments that it acquired when it bought Wachovia, but investment banking is inherently risky.

And, of course, Bank of America (BAC), JPMorgan Chase (JPM) and Citigroup all already have mammoth investment banking operations that position them as Wall Street heavyweights. Competing in that group will be a challenge.

Despite early signs that Wachovia's investment bank could be a casualty, it seems it'll now receive more emphasis than ever.