Despite the difficulty Wachovia(NYSE: WB) (formerly First Union) has had integrating its past acquisitions (including CoreStates Bank and The Money Store), the merger machine recently announced plans to create a joint venture with Prudential Financial(NYSE: PRU).

By coupling their resources to create the third-largest brokerage behind only Merrill Lynch(NYSE: MER) and Citigroup's(NYSE: C) Salomon Smith Barney unit, they hope to better compete with the largest players on Wall Street.

But the decision comes at a time when most large firms are scaling back their brokerage operations significantly. Merrill Lynch has slashed its brokerage division by nearly 35% since its 2000 peak, and Prudential itself has reduced its group by 26%.

It seems Wachovia is betting big to gain scale in a notoriously competitive business in this most miserable of markets. The venture does fit the bank's growth strategy; it's the only large player to grow its brokerage division in the past year (by around 2%). It's difficult, however, to say how good a deal Wachovia has made. No money will change hands, but the bank will own 62% of the new firm. But one would expect that because it's contributing far more resources to the venture, nearly twice the number of brokers at Prudential (8,109 vs. 4,377).

The estimated cost savings of $220 million through 2005 disappears when you consider the new company will take an after-tax charge of $681 million over 18 months in relation to the venture. It's also been fairly well-known for nearly a year that Prudential has been looking to sell or spin off its brokerage division.

Wachovia could have negotiated a better deal, especially when one considers overall brokerage revenues are down as much as 50% at large firms.

In the end, it really depends on which economic forecast you subscribe to. Wachovia's bet could pay off if the brokerage industry makes a strong comeback, and at present, it's prepared to bank on that being the case.