American banking major Wells Fargo is reportedly looking to sell its asset management business, which managed $578bn as of the end of June this year.

A potential divestment could bring more than $3bn to the bank, Reuters reported citing sources familiar with the matter.

The San Francisco-based lender has been in talks with asset management companies and private equity firms for a potential deal.

However, no deal has been finalised yet, the report added.

Wells Fargo’s asset management arm offers mutual funds and retirement products. It is a part of the bank’s wealth and investment management division that caters to wealthy clients.

The wealth division is spearheaded by JPMorgan’s former head of wealth management Barry Sommers.

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By GlobalData

The move is part of Wells Fargo CEO Charles Scharf’s strategy turn around the group, which was embroiled in major sales practices scandal.

Since then, Wells Fargo has been grappling with higher costs as it entered a settlement with US regulators.

Earlier this month, Wells Fargo reported a 57% decline in profits, in its third-quarter results due to the rise in costs.

Scharf said that he is targeting an annual savings of $10bn in the long-term.

During the third-quarter earnings call, Scharf told analysts that the bank will exit non-core businesses to boost its balance sheets.

Scharf said: “I just want to be clear. We are exiting them because they are not core to serving our core customer base on the consumer and large corporate side. We are not exiting them because of the asset cap.”

However, the US Federal Reserve has imposed restrictions on its balance sheet, which can be lifted only after the bank improves its risk management controls.

Before Scharf took over, Wells Fargo had already sold its retirement plan services business to Principal Financial Group for $1.2bn, last year.

Last week, Wells Fargo terminated between 100-125 employees for collecting the coronavirus (Covid-19) relief funds inappropriately.

Earlier this month, Wells Fargo slashed over 700 commercial banking jobs as part of its multi-billion-dollar cost-cutting measure.