Wells Fargo & Company WFC is looking to divest its asset management division, per Reuters. The sale is likely to fetch around $3 billion for the company.
As of Sep 30, 2020, the company’s asset management division had about $607 billion under management. The division is part of the company’s wealth and investment management division, which offers mutual funds and retirement products. However, the company is unlikely to sell its wealth management business that serves high-net worth customers.
The company is likely to have discussed about the potential deal with some asset management companies and private equity firms even though the deal is not certain.
Persistent rise in costs over the years including a settlement with regulators has dented profitability. Therefore, to keep costs in control, the company has been exiting non-core businesses. Notably, Charles Scharf, CEO of Wells Fargo said, “I just want to be clear. We are exiting them because they are not core to serving our core customer base on the consumer and large corporate side. We are not exiting them because of the asset cap.” The CEO has targeted about $10 billion in annual savings over the long term.
As part of restructuring, under the mounting pressure of cost control, Wells Fargo also recently trimmed its workforce. It also intends to control costs through consolidating operations, processes’ improvement through technology and mechanization, outsourcing of certain operations, and branch closures.
Amid coronavirus-induced economic slowdown, several financial firms are undertaking initiatives to focus on core businesses. In June, Associated Banc-Corp ASB sold the insurance business — Associated Benefits & Risk Consulting — to USI Insurance Services LLC. Further, in July, Hilltop Holdings Inc. HTH concluded the sale of its wholly-owned subsidiary — National Lloyds Corporation — to Align Financial Holdings, LLC. Last week, Midland States Bancorp, Inc. MSBI divested the commercial FHA origination platform to Dwight Capital, a nationwide mortgage banking firm based in New York.
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