Wells Fargo slashes thousands of jobs as it recovers from sales scandal

Wells Fargo was among large U.S. banks to report second-quarter financial results on Friday.
Wells Fargo was among large U.S. banks to report second-quarter financial results on Friday. AP

Wells Fargo said Friday it eliminated more than 2,000 jobs last quarter, its biggest drop in four years, as the San Francisco-based bank pushes forward with efforts to slash costs following a scandal over fake accounts.

The decline during the three-month period that ended June 30 came as Wells Fargo looks to trim billions of dollars in expenses under previously announced initiatives. Those plans include closing hundreds of branches, centralizing functions and cutting outside consultants.

All told, the bank’s employee count fell by 2,200 in the quarter, Wells said in reporting its latest financial results. It marks the biggest quarterly decline in employees since 5,700 reductions toward the end of 2013, when Wells shaved large numbers of mortgage jobs amid slower refinancing activity. According to the bank, which has a large presence in Charlotte, a portion of the latest decline stemmed from attrition.

Speaking to analysts Friday, Wells Fargo executives noted their continued focus on lowering expenses by $4 billion through the end of 2019, as the bank seeks to improve an efficiency measure closely tracked by investors.

The third-largest U.S. bank by assets has been unable to restore its efficiency ratio, which shows how much it costs the bank to generate one dollar of revenue, to pre-scandal levels.

“Operating at this level is just not acceptable,” CEO Tim Sloan said Friday, adding that the bank is “firmly committed” to goals designed to enhance efficiencies.

Wells was one of three big U.S. banks to report financial results Friday. Though all three beat analysts’ estimates, their stocks fell on a day when major indices rose. Barclays analyst Jason Goldberg, in a Bloomberg TV interview, cited sluggish loan growth across the banking sector and lower-than-expected expansion in net interest margins as factors.

Wells Fargo, which employs about 24,100 in the Charlotte region, wouldn’t disclose to the Observer details about the latest drop in employment. The bank has previously said it expects reductions from centralizing and streamlining processes, and by cutting back in its mortgage business.

The bank has also previously said it’s looking at moving some work offshore as part of the centralization efforts. In an April report, the bank’s board cited a decentralized corporate structure as a major reason executives did not respond to bad sales practices quickly enough.

Another key part of Wells’ cost-cutting plans is the elimination of 450 branches, which Wells Fargo called “stores” before the scandal, through 2018.

As of the end of June, the number of branches stood at 5,977 – prompting Chief Financial Officer John Shrewsberry to remark it’s the first time the figure has been under 6,000 since Wells’ 2008 merger with Charlotte-based Wachovia.

Friday’s conference call with analysts showed how investors remain focused on how the bank’s bottom line might be affected by the scandal, in which employees for years opened accounts without customer knowledge to meet high-pressure sales goals.

New figures show improvement in the community banking segment at the center of the scandal, such as deposit totals higher than before it occurred. But customer loyalty scores have not returned to pre-scandal levels.

“We continued to make progress on rebuilding trust, which remains our top priority,” Sloan said, adding that the bank still has work to do to move past the scandal.

In the recent quarter, Wells reported $5.8 billion in profits, an increase of 4.5 percent from the same quarter last year. Revenue totaled $22.2 billion, little changed from a year ago. Earnings of $1.07 a share beat the $1.01 average estimate of 26 analysts surveyed by Bloomberg.

Results were helped in part by tax benefits worth $186 million from the proposed sale of its commercial insurance business. Sloan said the sale is part of an ongoing strategy to focus on core products and services that are most relevant to customers and provide the best returns to shareholders.

Also Friday, New York-based JPMorgan Chase said it posted a 13 percent increase in profit. Citigroup, also based in New York, reported a 3 percent decline in profit.

Charlotte-based Bank of America is scheduled to release its results Tuesday, as is New York’s Goldman Sachs Group. New York’s Morgan Stanley will announce results Wednesday.

Deon Roberts: 704-358-5248, @DeonERoberts