Wells Fargo Sheds Its Asset Manager as Scharf Reshapes Bank
(Bloomberg) -- Wells Fargo & Co. plans to sell its asset-management business to two private equity firms, part of Chief Executive Officer Charlie Scharf’s efforts to dump non-essential operations and help the bank emerge from years of scandals.
GTCR LLC and Reverence Capital Partners agreed to buy Wells Fargo Asset Management for $2.1 billion, according to a statement Tuesday. The unit has $603 billion 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 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 toward simplification, the bank agreed in December to divest its $10 billion private student-loan book to a group including Apollo Global Management Inc. and Blackstone Group Inc.
Not everything is for sale. San Francisco-based Wells Fargo decided to keep its private-label credit-card unit after reaching out to potential buyers last year, a person with knowledge of the matter said earlier this month.
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.
“Being independent means we are agile, we can innovate, we can move rapidly, we have our own brand, we’re not affected by external brand issues, and we have capital,” Marais said Tuesday in an interview. Wells Fargo “is very focused on addressing the challenges, and decided to focus on wealth. And it’s just important that if asset management is of lesser importance to them, it’s not a key strategic initiative, it is certainly much better for us to be independent.”
Shares of Wells Fargo, which have climbed 22% this year, fell 1.4% to $36.76 at 11:27 a.m. 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 cutthroat competition and a shift toward passive fund management, as well as high technology and compliance costs.
Among major U.S. banks, Wells Fargo is a midsize player in asset management. Morgan Stanley agreed last year to buy Eaton Vance Corp. for $7 billion, making it one of the firms with $1 trillion or more of assets under management, alongside JPMorgan Chase & Co. and Goldman Sachs Group Inc. Citigroup Inc. and Bank of America Corp. don’t have a major presence in the business.
“Other distribution systems would prefer to have independent asset managers as their distributors, rather than banks who they might view as somewhat if not very competitive with them,” Milton Berlinski, co-founder and managing partner at Reverence Capital, said Tuesday in an interview. “We have all the products that the Wells Fargo clients need and the distribution-platform needs.”
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