Wells Fargo (WFC) to Divest Corporate Trust Services Business

Wells Fargo WFC has inked a definitive agreement to sell its Corporate Trust Services (CTS) business to Australia-based Computershare Limited for $750 million. This is in line with the company’s strategy of concentrating on businesses core to its consumer and corporate client base. The transaction, likely to close in the first half of 2021, is still subject to customary closing conditions.

Computershare is one of the global leaders in corporate trust, stock transfer and employee share plan services.

Wells Fargo’s CTS business offers a wide array of services, such as trust and agency in connection with debt securities issued by public and private entities, government bodies as well as the banking and securities industries.
The executive vice president of Operations at Computershare, Frank Madonna, will head the acquired operations, as nearly 2,000 employees of CTS across the United States are anticipated to be transferred as part of the deal.

The head of Wells Fargo Commercial Capital, David Marks, said, “Additionally, we believe that Computershare’s similar approach to service and their emphasis on innovative product development will be valuable to our clients and Corporate Trust Services colleagues in the future.”

Likewise, Madonna stated, “We’re confident that as our businesses come together following the closing, our client proposition will be second to none in North America.”

Conclusion

Wells Fargo has been undertaking such steps with an aim to focus on its core operations, boost efficiency and strengthen the balance sheet. The pandemic-induced economic slowdown has hastened this initiative.

This February, Wells Fargo signed a deal to divest its asset management business to private equity firms GTCR LLC and Reverence Capital Partners, L.P. for $2.1 billion. In January, the bank announced a definitive agreement to sell its Canadian direct equipment finance business to The Toronto-Dominion Bank TD for an undisclosed amount.

Last December, the company agreed to divest its private student loan portfolio and Centurion Life Insurance unit. Earlier in June, Wells Fargo sold its Global Alternative Investments Feeder Fund Platform.

Post the disclosure of the sales scandal in September 2016, Wells Fargo has encountered several sanctions, including a cap imposed by the Federal Reserve on asset growth in early 2018. However, the company has come a long way in its remedial journey, especially with the central bank’s recent approval of its risk management and governance overhaul plan. The company continues to invest in businesses to boost its compliance and risk management capability.

Shares of Wells Fargo have gained 61.7% in the past six months, outperforming 60.8% 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.

Recent Business Restructuring Steps by Other Banks

There has been a rise in business restructuring efforts in the finance sector, of late. In January 2021, SVB Financial Group SIVB inked a stock-cum-cash deal to acquire Boston Private Financial Holdings, Inc. BPFH for $900 million in a bid to strengthen its private bank and wealth management offerings.

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