Wells Fargo plans to cut staff up to 10% within next three years

Bank is struggling to cut spending amid regulatory fines and higher legal costs stemming from scandals

Sep 20, 2018 @ 3:41 pm

By Bloomberg News

Wells Fargo & Co. plans to trim its workforce by about 5% to 10% within the next three years as CEO Tim Sloan works to pull the bank clear of a series of customer-abuse scandals and prop up a lagging stock price.

The bank had 265,000 employees as of June 30, according to a regulatory filing. Head count has been declining as Mr. 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. 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," Mr. Sloan said Thursday in a statement.

Mr. Sloan, who took the helm almost two years ago during a scandal over 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, the bank hasn't yet persuaded investors it's on the rebound. While the stock has climbed 23% since Mr. 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 former Goldman Sachs executive Gary Cohn. Mr. Cohn, who earlier this year finished a stint as a White House adviser, denied in the report as did Wells Fargo Chair Betsy Duke, who said that Mr. 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.

(More: Wells Fargo Advisors continues to see a decline in brokers)?

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