In what is likely to be Wells Fargo & Co’s biggest shake up since former Bank of New York Mellon chief executive Charles Scharf joined the bank as its CEO in 2019, sources familiar with the matter at hand have said, the U.S. bank is exploring the sale of its asset management business.
The potential deal illustrates how Scharf is thinking out of the box, beyond just cost cuts, as he attempts to turn around Wells Fargo following a multi-year sales practices scandal. He has stated, he is targeting $10 billion in annual savings in the long term.
According to two sources, Wells Fargo’s asset management business, which managed $578 billion on behalf of customers as of the end of June 2020, could fetch more than $3 billion in a sale. The bank has already discussed a potential deal with asset management companies we asll as private equity firms.
Sources have cautioned that the divestment is not certain and preferred the cover of anonymity given the confidentiality of the matter.
Wells Fargo’s spokesman declined to comment.
Earlier this month, Wells Fargo reported a 57% drop in its third-quarter profit missing Wall Street’s expectations with persistent costs continuing to act as headwinds.
Incidentally, the U.S. Federal Reserve has placed restrictions on Wells Fargo’s balance sheet, to be lifted only when the management team can prove it has sufficiently improved risk management and controls.
Scharf told analysts on the bank’s third-quarter earnings call this month that he expected to create some room on Wells Fargo’s balance sheet by exiting non-core businesses.
“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,” said Scharf.
Wells Fargo plans to keep its wealth management business that caters to high-net worth clients, said sources.
The wealth and investment management division is led by Barry Sommers, the former head of JPMorgan Chase & Co’s wealth management business that Scharf recruited in June.
Wells Fargo had started to trim the division even before Scharf because CEO. It sold its retirement plan services business to Principal Financial Group Inc last year for $1.2 billion.