Wells Fargo sells its asset management arm
GTCR and Reverence Capital Partners have agreed to buy Wells Fargo Asset Management for $2.1bn
New York — Wells Fargo plans to sell its asset-management business to two private equity firms, part of CEO Charlie Scharf’s efforts to dump non-essential operations and help the bank emerge from years of scandals.
GTCR and Reverence Capital Partners agreed to buy Wells Fargo Asset Management for $2.1bn, according to a statement on Tuesday. The unit has $603bn of assets under management and employs more than 450 investment professionals.
Scharf, who took the reins in late 2019, has conducted deep reviews of Wells Fargo’s businesses, and said earlier this year that divestitures would help improve the company’s focus. He listed asset management, corporate trust and rail leasing as units on the chopping block.
“This transaction reflects Wells Fargo’s strategy to focus on businesses that serve our core consumer and corporate clients, and will allow us to focus even more on growing our wealth and brokerage businesses,” Barry Sommers, CEO of Wells Fargo’s wealth and investment-management division, said in the statement.
Wells Fargo has been struggling under an asset cap imposed by the US Federal Reserve in 2018 to punish the lender for a series of lapses in governance and risk management. In one of the first signs of success in the drive to escape the penalty, the company secured the Fed’s acceptance of a proposal it submitted in September to overhaul operations.
Among its other moves towards simplification, the bank agreed in December to divest its $10bn private student-loan book to a group including Apollo Global Management and Blackstone Group.
Not everything is for sale. Wells Fargo decided to keep its private-label credit-card unit after reaching out to potential buyers in 2020, a person with knowledge of the matter said earlier in February.
The asset-management deal, which is expected to be completed in the second half of 2021, will leave Wells Fargo with a 9.9% equity interest in the operation. Nico Marais, who has led Wells Fargo Asset Management since 2019, will continue to oversee the business, according to the statement.
Shares of Wells Fargo, which have climbed 24% in 2021, advanced 0.4% to $37.40 at 9.32am in New York.
Asset management has seen a wave of consolidation in recent years, with big banks either bulking up their divisions in search of efficiencies or selling them to rivals eager to grow. The sector is responding to a squeeze on fees from cut-throat competition and a shift towards passive fund management, as well as high technology and compliance costs.
Among major US banks, Wells Fargo is a midsize player in asset management. In 2020, Morgan Stanley agreed to buy Eaton Vance for $7bn, making it one of the firms with $1-trillion or more of assets under management, alongside JPMorgan Chase and Goldman Sachs Group. Citigroup and Bank of America don’t have a major presence in the business.
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