Embattled Wells Fargo plans to cut up to 10% of its workforce
Wells Fargo & Co. plans to trim its workforce by 5% to 10% within the next three years as Chief Executive Tim Sloan works to pull the bank clear of a series of customer-abuse scandals and prop up a lagging stock price.
The San Francisco-based bank had 265,000 employees as of June 30, according to a regulatory filing. Headcount has been declining as Sloan works to clean up the bank and streamline its operations. The CEO made the announcement to employees at a town hall meeting.
“It says something about the revenue environment for them,” Charles Peabody, an analyst at Portales Partners, said in an interview. “If they’re not in the midst of recognizing that revenues are in trouble, they’re anticipating it.”
Wells Fargo has been struggling to cut spending amid regulatory fines and higher legal costs stemming from a string of customer abuses that erupted in 2016, starting with its admission that perhaps millions of checking, savings and other accounts had been created without customer authorization. The bank has pledged $4 billion in expense reductions by the end of next year.
“We are continuing to transform Wells Fargo to deliver what customers want — including innovative, customer-friendly products and services — and evolving our business model to meet those needs in a more streamlined and efficient manner,” Sloan said Thursday in a statement.
Sloan, who took the helm almost two years ago during the scandal over the falsified accounts, has worked to stabilize the bank. He’s shuffled executives and reworked internal controls while traveling the country to espouse a commitment to customer service.
By a number of yardsticks, though, the bank hasn’t yet persuaded investors it’s on the rebound. While the stock has climbed 23% since Sloan became CEO, it’s trailing the 53% advance of the broader KBW Bank Index. Rivals JPMorgan Chase & Co. and Bank of America Corp. have gained 75% and 95%, respectively.
Speculation that the bank wants a new CEO spilled into public this week when the New York Post said the board had approached Gary Cohn, the former Goldman Sachs Group Inc. executive who finished up a stint this year as a White House economic adviser. Cohn denied the report, as did Wells Fargo Chair Betsy Duke, who said Sloan “has the unanimous support of the board, and this support has never wavered.”
Analysts cut their estimates for Wells Fargo earnings again and again after the Federal Reserve punished the bank with an unprecedented cap on growing assets. The analysts began this year predicting a record $24-billion annual profit, and now the average estimate is for less than $21 billion, the weakest since 2012.
