Principal Financial Group agreed to buy Wells Fargo's retirement plan services unit 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.
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 focus on those where it can earn the best returns.
The retirement-plan services business was part of Wells Fargo's wealth and investment-management arm. The broader division includes Wells Fargo Asset Management, retail brokerage Wells Fargo Advisors and the private bank for high-net-worth clients.
Wells Fargo wealth and investment-management unit head Jon Weiss has been working to streamline the unit since he took over in 2017. At the bank's 2018 investor day, Weiss 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.
Wells Fargo previously reached deals to dispose of an insurance business, an auto-lending subsidiary in Puerto Rico, a payroll-services unit and branches in three Midwestern states.
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.
