Exclusive: Wells Fargo explores sale of asset management business – sources

In this news, we discuss the Exclusive: Wells Fargo explores sale of asset management business – sources.

(Reuters) – Wells Fargo & Co WFC.N is considering a sale of its asset management business, in what would be the biggest reshuffle at the U.S. bank since former Bank of New York Mellon CEO Charles Scharf, joined last year as CEO. familiar with the matter said Thursday.

The potential deal would illustrate how Scharf envisions sweeping steps, beyond cost cuts, as he seeks to turn Wells Fargo around following a years-old sales practices scandal. He said he was aiming for $ 10 billion in savings per year in the long run.

Wells Fargo’s asset management arm, which managed $ 578 billion on behalf of clients at the end of June, could make more than $ 3 billion from a sale, two of the sources said.

The San Francisco-based bank discussed a potential deal with asset management and private equity firms, the sources said, who warned a divestment was not certain and asked not to not be identified because the matter is confidential.

A Wells Fargo spokesperson declined to comment.

Wells Fargo reported a 57% drop in third-quarter profit earlier this month, missing Wall Street expectations as lingering costs continued to haunt the bank.

The bank has struggled with these costs since 2016, when it struck a deal with regulators that detailed millions of fake accounts that employees created on behalf of customers without their permission to meet sales targets.

Bank executives have repeatedly pointed out that the worst fallout is in the past, but high operating losses have persisted.

The US Federal Reserve has imposed restrictions on Wells Fargo’s balance sheet, which will only be lifted when the management team can prove that it has sufficiently improved risk management and controls.

Scharf told analysts during the bank’s third quarter earnings call this month that he expected to create room on Wells Fargo’s balance sheet by exiting non-core businesses.

“I just want to be clear. We are leaving them because they are not essential to serving our core clientele on the consumer and large business side. We are not leaving them because of the asset cap, ”said Scharf.

The asset management business, which is part of the wealth management and investment division of Wells Fargo, offers mutual funds and retirement products. Wells Fargo plans to maintain its wealth management business which targets high net worth clients, the sources said.

The wealth management and investment division is headed by Barry Sommers, former head of the JPM.N wealth management business of JPMorgan Chase & Co whom Scharf hired in June.

Wells Fargo had started downsizing the division even before Scharf as CEO. It sold its pension services business to Principal Financial Group Inc. PFG.O last year for $ 1.2 billion.

Report by David French in New York; Additional reporting by Imani Moise and Joshua Franklin in New York; Editing by Daniel Wallis

Original © Thomson Reuters

Originally posted 2020-10-22 17:46:10.

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