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Wells Fargo (WFC) to Divest Private Student Loan Portfolio

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Wells Fargo (WFC - Free Report) has agreed to sell its private student loan portfolio to investors. The transaction is likely to close in the first half of 2021. With the conclusion of the sale, the portfolio will be serviced by Firstmark, a subsidiary of Nelnet, Inc. (NNI - Free Report) .

In September, Wells Fargo had notified customers about its desire to quit the private student loan business. However, the company will continue to accept new loan applications from existing customers till Jan 28, 2021. As of Sep 30, 2020, the company's private student loan portfolio had a principal balance of $10 billion.

Wells Fargo has undertaken several such divestiture measures over the years to focus on its core operations, boost efficiency and strengthen balance sheet. These have resulted in significant cost savings for the bank.

Earlier this month, the company agreed to divest Centurion Life Insurance to Bestow, a digital life insurance platform. In June 2020, Wells Fargo sold its Global Alternative Investments Feeder Fund Platform to a financial technology firm, iCapital Network, in a bid to simplify operations and provide innovative products to the bank’s clients.

Though post breakout of the sales scandal in September 2016, Wells Fargo has suffered due to several sanctions, including a cap imposed by the Federal Reserve on asset growth in early 2018, the company has come a long way in its remedial journey. It continues to invest in businesses to enhance compliance and risk management capability. This makes the bank less vulnerable to any regulatory headwinds.

Shares of Wells Fargo have gained 6.1% in the last six months against 17.5% growth registered by the industry.

 

Currently, Wells Fargo carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amid the coronavirus pandemic-induced economic slowdown, several financial firms are undertaking initiatives to focus on core businesses. In November, People’s United Financial’s banking subsidiary People's United Bank completed the divesture of People's United Insurance Agency to AssuredPartners.

At the end of this September, Umpqua Holdings Corporation signed an agreement to divest the wealth management business to Steward Partners Global Advisory, LLC. Also, CIT Group sold its trust and wealth advisory business to Sunflower Bank, N.A., a subsidiary of Denver, CO-based FirstSun Capital Bancorp.

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