Dive Brief:

• Wells Fargo will sell its entire portfolio of rail operating lease assets, composed of nearly 105,000 railcars valued at roughly $4.4 billion, to the newly formed joint venture between GATX Corp. and Brookfield Infrastructure.
• Additionally, Brookfield Infrastructure intends to acquire Wells Fargo’s rail finance lease portfolio, composed of about 23,000 railcars and 440 locomotives, GATX said Thursday.
• The transaction is expected to close in the first quarter of 2026 or sooner, subject to closing conditions, and is not expected to have a material impact on the lender’s financial position or earnings, Wells Fargo stated.

Dive Insight:

The rail leasing business was part of CEO Charlie Scharf’s plan for divestitures after he took the helm of the bank in 2019 to take the lender forward after its fake-accounts scandal and refocus the business. In 2021, after reviewing Wells Fargo’s businesses, Scharf listed asset management, corporate trust, and rail leasing as units that would be offloaded to improve the company’s focus.

While speaking at a conference last week, Scarf noted that the bank has been exiting businesses that yield lower returns or exhibit lackluster growth rates.

He highlighted that each of Wells Fargo’s segments – consumer and small-business banking, consumer lending, wealth management, commercial banking and corporate and investment banking – “should be growing faster than they’re growing today and have higher returns.”

As the company inches closer to the eventual removal of a $1.95 trillion asset cap it operates under – tied to its last remaining consent order – Scharf noted that when the asset cap is eventually lifted, “there’s no light switch” related to the bank’s growth trajectory.

Wells Fargo Rail is one of the largest rail equipment operating lessors in North America, with more than 135,000 railcars and 850 locomotives. The bank’s in-house staff manages the unit that delivers locomotives, which are available for leasing, according to the company's website.

“This transaction is consistent with Wells Fargo’s ongoing strategy of simplifying our businesses and focusing on products and services that are core to our clients,” David Marks, executive vice president with Wells Fargo commercial banking, said in a statement.

Wells Fargo purchased GE Capital Rail Services and combined this acquisition with First Union Rail Corporation in September 2015. First Union Rail was renamed as Wells Fargo Rail in February 2016. 

Wells Fargo declined to comment beyond the press release.

The railcar operating fleet consists of 95% freight cars, featuring a diverse mix of specific car types, GATX said.

Wells Fargo Securities, Bank of America Securities, MUFG Bank, and Sumitomo Mitsui Banking Corp. will provide the joint venture with a $3.2 billion, five-year unsecured term loan and a $250 million unsecured revolving credit facility, in addition to partner equity contributions.

GATX will have commercial and operational control of the joint venture assets and will manage all assets on behalf of the partners.

According to the terms of the agreement, initial joint venture equity ownership will be 30% by GATX and 70% by Brookfield Infrastructure, but GATX will have the option to acquire 100% of the joint venture equity over time.

GATX’s initial equity contribution will be roughly $400 million and will be funded through general operating cash flow and financing activity, according to the press release.

“This is an outstanding opportunity to build on GATX’s leading North American platform,” Robert C. Lyons, president and CEO of GATX, said in a statement. 

Lyons noted that the company’s 125-year journey has positioned it to acquire and integrate the fleet. The recent acquisition will enable the company to maintain its financial flexibility and continue growing its businesses. GATX will work closely with its customers to ensure a smooth transition to the firm’s commercial and operational platform. 

“The acquisition will enhance GATX’s fleet diversification, providing additional opportunities to serve our customers,” Lyons said.