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Wells Fargo (WFC) Asset Management Arm Likely to Attract Bids
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Per a Bloomberg report (citing persons familiar with the matter), Wells Fargo’s (WFC - Free Report) asset management operation is expected to attract second-round bids from several firms. These include asset management and private equity firms.
Companies weighing bids include asset managers like Ameriprise Financial (AMP - Free Report) and Toronto-based CI Financial. Also, private equity firms such as New York-based Reverence Capital Partners and Chicago headquartered GTCR LLC have shown interest in Wells Fargo’s asset management unit.
The bids are due later this month and Wells Fargo could narrow down the auction to one or two firms after this round.
Earlier in October, Reuters had reported that Wells Fargo is mulling divestiture of its asset management business, which could fetch more than $3 billion. This business is part of the company’s Wealth and Investment Management segment, which had total assets under management worth $607 billion as of Sep 30, 2020.
Our Take
Since the breakout of the bogus account openings scandal in late 2016, Wells Fargo has been involved in a number of probes and lawsuits, which are likely to keep its expense level elevated. Nonetheless, the bank has diligently undertaken several remedial measures and initiatives to keep afloat, which include divestiture/closure of non-core operations.
In fact, during the third quarter 2020 earnings conference call in October, Wells Fargo CEO, Charles Scharf, said “We're going to continue to exit some things which aren't core to the U.S. banking franchise.”
At present, cut throat competition and a shift toward passive fund management are weighing on asset management industry. Further, industry players are facing rising costs related to technology, outflows, fee pressure and heightened regulations. Thus, the business requires substantial scale to remain profitable.
Currently, Wells Fargo doesn’t have much scale and its plan to move away from asset management business seems prudent. Even State Street (STT - Free Report) is mulling to divest its asset management arm and a Bloomberg report mentioned Invesco (IVZ - Free Report) and UBS Group AG as potential contenders.
Share of Wells Fargo have lost 46.8% so far this year compared with the industry’s fall of 21.9%.
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Wells Fargo (WFC) Asset Management Arm Likely to Attract Bids
Per a Bloomberg report (citing persons familiar with the matter), Wells Fargo’s (WFC - Free Report) asset management operation is expected to attract second-round bids from several firms. These include asset management and private equity firms.
Companies weighing bids include asset managers like Ameriprise Financial (AMP - Free Report) and Toronto-based CI Financial. Also, private equity firms such as New York-based Reverence Capital Partners and Chicago headquartered GTCR LLC have shown interest in Wells Fargo’s asset management unit.
The bids are due later this month and Wells Fargo could narrow down the auction to one or two firms after this round.
Earlier in October, Reuters had reported that Wells Fargo is mulling divestiture of its asset management business, which could fetch more than $3 billion. This business is part of the company’s Wealth and Investment Management segment, which had total assets under management worth $607 billion as of Sep 30, 2020.
Our Take
Since the breakout of the bogus account openings scandal in late 2016, Wells Fargo has been involved in a number of probes and lawsuits, which are likely to keep its expense level elevated. Nonetheless, the bank has diligently undertaken several remedial measures and initiatives to keep afloat, which include divestiture/closure of non-core operations.
In fact, during the third quarter 2020 earnings conference call in October, Wells Fargo CEO, Charles Scharf, said “We're going to continue to exit some things which aren't core to the U.S. banking franchise.”
At present, cut throat competition and a shift toward passive fund management are weighing on asset management industry. Further, industry players are facing rising costs related to technology, outflows, fee pressure and heightened regulations. Thus, the business requires substantial scale to remain profitable.
Currently, Wells Fargo doesn’t have much scale and its plan to move away from asset management business seems prudent. Even State Street (STT - Free Report) is mulling to divest its asset management arm and a Bloomberg report mentioned Invesco (IVZ - Free Report) and UBS Group AG as potential contenders.
Share of Wells Fargo have lost 46.8% so far this year compared with the industry’s fall of 21.9%.
At present, the stock carries Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
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