Wells Fargo (WFC) to Divest 52 Midwest Branches to Flagstar
With a view to cut costs, Wells Fargo & Company WFC has inked a deal with Flagstar Bancorp FBC to divest all of its branches in Indiana, Michigan and Ohio. While the financial details were not disclosed, the deal is expected to close in the last quarter of 2018.
The 52 branches in consideration, including four branches of Wisconsin, comprise about $2.3 billion in deposits. Also, 490 employees working across the branches will continue to work with Flagstar.
Post this deal, Wells Fargo will cease to have retail banking presence in Indiana, Michigan and Ohio. However, the bank will continue providing commercial banking, wealth management and retail brokerage services across the region.
The transaction is in line with the Wall Street biggie’s target to reduce branches by about 800 by the end of 2020 to combat high legal expenses. Also, shift in preferences of consumers to online and mobile banking marks as another key reason behind the closures.
Troubles for Wells Fargo had begun from its retail banking segment in September 2016, when its employees had opened unauthorized accounts on behalf of its clients to fulfil sales targets. Following this, scandals in different areas of business had come to light, which put Wells Fargo under strict supervision of regulators.
In May 2018, Wells Fargo had disclosed an impressive cost-control plan to help it deal with persistent legal expenses. Also, the bank’s efforts to revamp its financial position supported by lower tax rates and rising rate environment might help it overcome the negatives.
Shares of Wells Fargo have lost 8.2% over the past six months compared with the industry’s decline of 1.3%.
Wells Fargo currently carries a Zacks Rank #3 (Hold).
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