(Reuters) – Wells Fargo & Co (WFC.N) is pulling back from retail banking within the U.S. Midwest, selling all of its branches in three states, because the financial institution embarks on a broader evaluation of department profitability throughout the nation.
Flagstar Bancorp Inc (FBC.N) stated on Tuesday it might purchase 52 Wells Fargo branches in Indiana, Michigan, Ohio and Wisconsin for an undisclosed quantity. The branches have about $2.three billion in deposits and $130 million in loans.
Wells Fargo, the fourth-largest financial institution by belongings within the United States, will not have a retail presence in Indiana, Michigan and Ohio as soon as the deal closes, spokeswoman Bridget Braxton stated. It will proceed to function 48 branches in Wisconsin, in addition to its business banking, wealth administration, and retail brokerage enterprise throughout the area.
The transaction is a part of a technique administration laid out at San Francisco-based Wells Fargo’s investor day final month, involving the sale or closure of 800 branches by 2020.
The financial institution is working to make its operation extra environment friendly and worthwhile in response to investor calls for whereas additionally tackling authorized and regulatory points stemming from a gross sales scandal that erupted from its retail banking enterprise in 2016.
Wells Fargo is concentrating on branches with slower-than-expected mortgage or deposit progress, in addition to areas the place it doesn’t have sufficient market share to be aggressive. For occasion, its portion of deposits in Indiana’s Allen County, which incorporates Fort Wayne, fell to 29 % in 2017 from 35 % in 2016.
“We simply don’t have a major retail banking presence in Indiana, Michigan, Ohio and parts of Wisconsin,” Braxton stated. “The prospect for growth in markets where we don’t have retail banking density drove this decision.”
Troy, Michigan-based Flagstar views the branches slightly in a different way. Its information launch on the deal highlighted that the branches it’s buying have No. 1 market share place in Fort Wayne, in addition to the Upper Peninsula of Michigan, and that the deal will double its buyer base and supply an essential supply of liquidity.
“This was an opportunity not to be missed, not only to change our balance sheet, but to fundamentally change who we are,” Flagstar Chief Executive Officer Alessandro DiNello stated on a name with analysts.
As Wells Fargo proceeds with the department evaluation, it will not be troublesome to discover different regional or group banks keen to purchase branches for progress.
Reporting by Imani Moise in New York; Editing by Lauren Tara LaCapra and Will Dunham