Wells Fargo, One of the Big Four US Banks, Sells Asset Management Division to Private Equity Fund

2016 Ghost Account Fines and Poor Performance
Efforts to Secure Liquidity Underway

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Wells Fargo, one of the four major banks in the United States, is selling its asset management division to private equity firms. Wells Fargo has been struggling due to fines related to the 2016 "ghost account" scandal and poor business performance. This business restructuring is reportedly aimed at securing liquidity by divesting non-core businesses.

According to major foreign media on the 23rd (local time), Wells Fargo announced that it will sell its asset management division to private equity firms GTCR LLC and Reverence Capital Partners. The sale price is approximately $2.1 billion (about 2.332 trillion KRW), somewhat lower than the initially reported $3 billion. Wells Fargo's asset management division manages assets worth $603 billion. The deal is expected to be completed in the second half of this year.

Wells Fargo is expected to retain a 9.9% stake in the asset management division after the sale, maintaining a partnership relationship.

CNBC described the sale as "the largest restructuring of a U.S. bank since Charles Scharf joined as CEO in 2019."

This business restructuring is a measure to normalize Wells Fargo, whose performance has deteriorated due to years of revenue inflation and various scandals. In 2016, Wells Fargo agreed to pay a $185 million fine to the Consumer Financial Protection Bureau after it was revealed that employees had secretly created millions of "ghost accounts" to withdraw customers' money under various fee pretenses. Additionally, poor business performance due to COVID-19 has continued.

Earlier, CEO Charles Scharf promised the board to reduce costs by $10 billion annually and carried out large-scale layoffs centered on the bank. In December last year, he announced plans to sell the personal student loan portfolio, and in January, agreed to sell the Canadian direct equipment financing division to Toronto-Dominion Bank.

This content was produced with the assistance of AI translation services.