Wells Fargo & Co. agreed to sell a retirement plan services unit to Principal Financial Group Inc. for $1.2 billion as the bank streamlines operations in the wake of scandals.
The business, which has $827 billion in assets under administration, includes operations in the U.S., the Philippines and India, Principal said Tuesday in a statement. Principal gains operations that handle 401(k) and pension plans, executive deferred compensation and institutional trust and custody offerings.
Wells Fargo, the fourth-largest U.S. bank by assets, has been paring smaller business lines since scandals began erupting from its branch network in 2016. Problems have since emerged in more units, prompting the Federal Reserve to ban Wells Fargo from growing until regulators are confident in executives’ ability to oversee their operations. That’s added to pressure on the firm to shed some units and concentrate on those where it can earn the best returns.
“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,” Jon Weiss, head of Wells Fargo’s wealth and investment-management business, said in a separate statement.
The retirement plan services business is part of Wells Fargo’s wealth and investment-management arm. Weiss has been working to make the unit more efficient since he took over in 2017. At the bank’s 2018 investor day, he said he’s targeting $600 million in savings by 2020. Earlier this year, Weiss hired Nyron Latif from Goldman Sachs Group Inc. as head of operations to review the unit’s efficiency.
The Fed barred Wells Fargo in February last year from increasing assets beyond their level at the end of 2017, citing concerns about a variety of customer abuses, including the revelation that employees had opened millions of accounts without consumers’ permission. The bank told analysts and investors at the start of this year that it’s planning to operate under the cap through the end of 2019, rather than just the first half.