Wall Street biggie Wells Fargo & Company (WFC - Free Report) recently announced that its subsidiary, Wells Fargo Bank, has agreed to divest the Institutional Retirement & Trust (IRT) business to Principal Financial Group (PFG - Free Report) based in Des Moines, IA, for $1.2 billion. The transaction, subject to regulatory approval, is expected to close early in third-quarter 2019.
Principal Financial will fund nearly $400-$500 million of the aggregate purchase price through new debt, while the remaining amount will be paid in cash. Also, out of the total price of $1.2 billion, $150 million will be paid in 2021 on strong business performance and exceeding expectations.
Jon Weiss, head of Wells Fargo Wealth & Investment Management, noted, “The scale derived from a combination of IRT and the Principal Financial Group will benefit clients, plan participants, and team members. At the same time this sale reflects Wells Fargo’s strategy to focus our resources on areas where we can grow and maximize opportunities within wealth, brokerage and asset management.”
Notably, Principal Financial provides a wide range of retirement savings, investment, and insurance products and services to nearly 24 million customers through various subsidiaries.
Wells Fargo’s retirement plan services unit, which includes its 401(k) savings accounts business, if merged with Principal Financial, would aid in expanding similar business of the latter. As of Dec 31, 2018, Wells Fargo’s retirement plan services unit had $827 billion in assets under administration.
Wells Fargo has made such divestments earlier as well. With a view to cut costs, it inked a deal with Flagstar Bancorp last year to divest all of its branches in Indiana, Michigan and Ohio. Also, it entered into a deal with the local unit of
Popular, Inc. (BPOP - Free Report) to offload its Puerto Rico auto finance business.
Our Viewpoint
Wells Fargo started facing troubles in its retail banking segment in September 2016, when its employees opened unauthorized accounts on behalf of the bank’s clients to fulfill sales targets. Following this, scandals in different areas of business came to light, which put Wells Fargo under the strict supervision of regulators.
In May 2018, Wells Fargo disclosed an impressive cost-control plan to help it deal with persistent legal expenses. Also, the bank’s efforts to revamp its financial position supported by lower tax rates and rising rate environment might help it overcome negatives.
Shares of Wells Fargo have lost 7.3% over the past year compared with 6.9% decline recorded by the industry.
Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Top 10 Stocks for 2019
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Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
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Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
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Wall Street biggie Wells Fargo & Company (WFC - Free Report) recently announced that its subsidiary, Wells Fargo Bank, has agreed to divest the Institutional Retirement & Trust (IRT) business to Principal Financial Group (PFG - Free Report) based in Des Moines, IA, for $1.2 billion. The transaction, subject to regulatory approval, is expected to close early in third-quarter 2019.
Principal Financial will fund nearly $400-$500 million of the aggregate purchase price through new debt, while the remaining amount will be paid in cash. Also, out of the total price of $1.2 billion, $150 million will be paid in 2021 on strong business performance and exceeding expectations.
Jon Weiss, head of Wells Fargo Wealth & Investment Management, noted, “The scale derived from a combination of IRT and the Principal Financial Group will benefit clients, plan participants, and team members. At the same time this sale reflects Wells Fargo’s strategy to focus our resources on areas where we can grow and maximize opportunities within wealth, brokerage and asset management.”
Notably, Principal Financial provides a wide range of retirement savings, investment, and insurance products and services to nearly 24 million customers through various subsidiaries.
Wells Fargo’s retirement plan services unit, which includes its 401(k) savings accounts business, if merged with Principal Financial, would aid in expanding similar business of the latter. As of Dec 31, 2018, Wells Fargo’s retirement plan services unit had $827 billion in assets under administration.
Wells Fargo has made such divestments earlier as well. With a view to cut costs, it inked a deal with Flagstar Bancorp last year to divest all of its branches in Indiana, Michigan and Ohio. Also, it entered into a deal with the local unit of
Popular, Inc. (BPOP - Free Report) to offload its Puerto Rico auto finance business.
Our Viewpoint
Wells Fargo started facing troubles in its retail banking segment in September 2016, when its employees opened unauthorized accounts on behalf of the bank’s clients to fulfill sales targets. Following this, scandals in different areas of business came to light, which put Wells Fargo under the strict supervision of regulators.
In May 2018, Wells Fargo disclosed an impressive cost-control plan to help it deal with persistent legal expenses. Also, the bank’s efforts to revamp its financial position supported by lower tax rates and rising rate environment might help it overcome negatives.
Shares of Wells Fargo have lost 7.3% over the past year compared with 6.9% decline recorded by the industry.
Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
See Latest Stocks Today >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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