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Wells Fargo (WFC) to Divest Majority Interest in Eastdil

Zacks Equity Research

Earlier this week, Wells Fargo & Company WFC announced plans to divest its private real estate investment banking division, Eastdil Secured. Though terms of the deal were not disclosed, the company will retain a minority ownership interest in Eastdil. The transaction is expected to close in fourth-quarter 2019.

Eastdil’s management is reclaiming ownership in the firm, in partnership with Guggenheim Investments clients and Singaporean sovereign wealth fund Temasek Holdings.

Post-sale, Wells Fargo will retain the public market real estate investment bankers of Eastdil, which will form the Real Estate, Gaming, Lodoging, and Leisure (“REGAL”) industry coverage group within Corporate & Investment Banking.

Through REGAL, Wells Fargo will provide a full range of investment banking and capital markets services, including advisory solutions on mergers and acquisition, debt and equity origination and structuring. Also, Wells Fargo disclosed that REGAL will continue its long-standing partnership with Wells Fargo’s Commercial Real Estate group.

“This newly dedicated Real Estate, Gaming, Lodging, and Leisure investment banking coverage group will leverage partnerships across the bank, with a deep pool of talent and expertise, to serve clients in these key industries and their complex financial needs,” said Rob Engel, co-head of Wells Fargo Corporate & Investment Banking.

In April 2019, Wells Fargo had announced that it will divest the Institutional Retirement & Trust business to Principal Financial Group based in Des Moines, IA, for $1.2 billion. 

Wells Fargo’s efforts to offload unprofitable businesses bode well. Also, ongoing investment in the businesses to enhance compliance and risk management capability encourages us. However, post breakout of the sales scandal, Wells Fargo continues to suffer from several sanctions, including a cap imposed by the Federal Reserve on asset growth in early 2018.

In six months’ time, shares of Wells Fargo have lost 2.9% against 9% growth recorded by the industry.

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

Stocks to Consider

Citigroup C has witnessed 2.4% upward estimate revision over the past 60 days. Also, the company’s shares have risen nearly 24% in the past six months. It has a Zacks Rank #2 (Buy) at present.

BankUnited’s BKU earnings estimates for the current year have been revised 2.5% upward over the past 60 days. Also, the company’s shares have risen 10.8% in the past six months. It carries a Zacks Rank #2.

The Zacks Consensus Estimate for JPMorgan Chase & Co.’s JPM earnings for the current year has been revised 1.8% upward over the past 60 days. Also, the company’s shares have risen nearly 11% in the past six months. It currently carries a Zacks Rank of 2.

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