Per a Bloomberg article, Wells Fargo & Company WFC is mulling to divest its unit that offers store-branded credit cards, with a view to free-up capital in less profitable businesses.
The unit is dedicated to offering private-label cards and conducting point-of-sale financing agreements with retailers to enable customers to shop for products like jewelry, appliances and furniture on credit. The company is approaching bidders directly, according to people with knowledge of the matter, the article said.
Despite investing large sums in the unit, Wells Fargo has not been able to bag a position among the top five companies, and is behind its peers such as Synchrony Financial SYF, Citigroup C and Capital One Financial COF.
This move comes as part of the bank’s efforts to streamline its business in order to deal with consequences of the unauthorized account scandal, which led the Federal Reserve to impose a cap on the company’s asset growth in February 2018.
In fact, this is not the first divestment that Wells Fargo will make. It inked a deal with iCapital Network, a financial technology firm in June to sell its Global Alternative Investments (GAI) Feeder Fund Platform in an effort to simplify operations and provide innovative products to the bank’s clients. The move was also undertaken with a view to cut costs.
Wells Fargo’s ongoing investment in the businesses to enhance compliance and risk management capability encourages us.
In six months’ time, shares of Wells Fargo have gained 7.3% compared with 31.6% 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.
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