Principal Financial close to Wells Fargo retirement unit acquisition-sources

A Wells Fargo logo is seen in New York City, U.S. January 10, 2017. REUTERS/Stephanie Keith

(Reuters) - Principal Financial Group Inc is in advanced talks to acquire Wells Fargo & Co’s retirement plan services business, in a deal that could exceed $1 billion, people familiar with the matter said on Sunday.

Wells Fargo has been seeking to streamline its business as it grapples with the fallout of customer abuse scandals. The bank is prohibited from growing in size after the Federal Reserve slapped it with an unprecedented asset cap in February 2018, citing “widespread consumer abuses and compliance breakdowns.”

The bank’s retirement plan services unit, which includes Wells’ 401(k) savings accounts business, would expand a similar business of Principal Financial. If the negotiations are concluded successfully, a deal could be announced later this month, according to the sources, who spoke on condition of anonymity as the information is confidential.

Wells Fargo and Principal Financial declined to comment.

Based in Des Moines, Iowa, Principal Financial is a life insurance and financial services group with a market capitalization of $14.5 billion.

It is the latest in a series of divestments pursued by Wells Fargo.

In 2018, Wells Fargo announced deals to sell 52 branches spread across Indiana, Michigan, Ohio and Wisconsin to Flagstar Bancorp Inc, as well as a $1.7 billion deal to offload its Puerto Rico auto finance business to the local unit of Popular Inc.

The disclosure three years ago that Wells Fargo created millions of fake customer accounts prompted regulatory probes into mortgage foreclosures, auto insurance sales and its wealth management businesses, resulting in billions of dollars in fines.

Reporting by David French in New York; Editing by Peter Cooney