Wells Fargo Agrees to Sell Puerto Rico Unit for $1.7 Billion
(Bloomberg) -- Wells Fargo & Co. agreed to sell its Puerto Rico banking subsidiary to Popular Inc. for about $1.7 billion as the lender retreats from auto lending.
The all-cash deal will include about $1.5 billion in retail auto loans and $340 million in commercial loans from Wells Fargo’s Reliable Financial Services unit, San Juan-based Popular said Wednesday in a statement. Popular will also acquire other assets and assume some of Reliable’s liabilities.
“We are confident that it will be positive for Puerto Rico and particularly for the auto industry,” Reliable Chief Executive Officer José Arbona said in the statement.
Wells Fargo is shedding the business after auto lending fell out of favor last year and Hurricane Maria prompted a jump in provisions. The sale may also give Wells Fargo room to grow in other areas after the Federal Reserve restricted the bank from increasing assets until it improves controls.
Wells Fargo lost its crown as the top U.S. auto lender last year as it scaled back that business amid concerns that new-car incentives and an oversupply of vehicles coming off lease was crimping prices. The bank set aside $450 million of reserves to cover possible hurricane-related losses in the third quarter, including damage caused by Maria in Puerto Rico.
Even before Maria, a decade of economic contraction had prompted some banks to fold. The Category 4 hurricane further tested the industry, damaging collateral and wiping out electricity across the island, prompting many branches and automated teller machines to shut down for weeks.
But banking stocks have rallied back from their post-hurricane lows, as earnings dodged worst-case scenarios and the federal government announced tens of billions in disaster aid, which could help fuel a burst of economic activity.
©2018 Bloomberg L.P.