Wells Fargo is considering a sale of its wealth management business. This would be the bank’s biggest upheaval since former Mellon chairman of the Bank of New York, Charles Scharf, joined as CEO last year.
The potential deal would illustrate how Scharf is looking at drastic steps beyond cutting costs Wells Fargo tries to turn around after years of sales practice scandal. He said he was aiming for $ 10 billion a year in savings over the long term.
Wells Fargo’s wealth management arm, which managed $ 578 billion on behalf of clients at the end of June, could raise more than $ 3 billion on a sale, two sources said Thursday.
The San Francisco-based bank has been discussing a potential deal with asset managers and private equity firms, according to sources, who have indicated it is unsafe to dispose of and asked not to be identified as the matter is confidential .
A Wells Fargo spokesman declined to comment.
Wells Fargo reported a decrease of 57 percent Its third quarter earnings earlier this month fell short of Wall Street’s expectations as the bank continued to suffer from ongoing costs.
The bank has been grappling with these costs since 2016 when it reached a settlement with regulators that listed millions of bogus accounts that employees created on behalf of customers without permission to meet sales targets .
Bank executives have repeatedly signaled that the worst fallout is in the past, however There are still increased operating losses.
The US Federal Reserve has curtailed Wells Fargo’s balance sheet and only removed it if the management team can demonstrate that risk management and controls have been sufficiently improved.
Scharf told analysts on the bank’s earnings call for the third quarter this month that it is likely to create some space 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 part of our core customer base on the consumer and large business side. We are not leaving them because of the upper limit on assets, ”said Scharf.
The wealth management business, which is part of Wells Fargo’s wealth and investment management division, offers mutual funds and retirement products. Wells Fargo plans to maintain its wealth management business for high net worth clients.
Wealth and Investment Management will be led by Barry Sommers, former head of the wealth management business of JPMorgan Chase, who joined Scharf in June.
Wells Fargo had already started cutting the division as CEO before Scharf. Last year, the company sold its pension plan services business to Principal Financial Group Inc. for $ 1.2 billion.