Sen. Elizabeth Warren grills Wells Fargo CEO: ‘You should be fired’
Wells Fargo expects to slash its employment by about 5 to 10 percent over the next three years, as part of a sweeping initiative to streamline the bank and make it more customer-focused, CEO Tim Sloan said Thursday.
The reduction would involve job cuts as well as attrition, Sloan said in a press release. Wells Fargo is based in San Francisco but maintains its largest employee base in Charlotte, where it has about 25,100 workers in the metro area.
Asked about what the reduction will mean for Charlotte, Wells spokesman Peter Gilchrist said the bank was not commenting on impacts by business line, location or job type.
The move also comes as Wells Fargo continues pushing to fix its reputation in the wake of a 2016 scandal involving the creation of unauthorized customer accounts, as well as more revelations of customer harm. Such disclosures have cost the bank business.
Wells Fargo had 264,500 employees companywide as of the end of June. Cutting 5 percent of that involves 13,225 jobs and 10 percent covers 26,450 positions. Thursday’s announcement appears to be one of the largest job cuts that Wells has ever disclosed.
“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 in the release.
Wells’ release also cited changing customer habits, including the rising use of digital banking options, as a factor in plans to cut employment.
‘First line of attack’
Sloan, who became CEO in 2016 after John Stumpf retired when the accounts scandal erupted, has been working to trim expenses at the fourth-largest U.S. bank by assets.
Under previously disclosed plans, the bank has said it wants to lower expenses by $4 billion through the end of 2019.
“When you pledge to cut costs, and need to cut costs, headcount is the first line of attack,” independent bank analyst Nancy Bush said Thursday.
Job reductions will likely be across the board, she said, adding that the bank’s mortgage business will likely be impacted the most. Nationwide, banks are seeing less demand from customers to refinance their mortgage as interest rates continue to rise, lowering revenues from refinancing activity.
Last month, Wells Fargo announced plans to lay off 106 employees in its Charlotte-area mortgage operation, part of a nationwide cut affecting 638 employees. The bank cited a slowdown in its mortgage business as a reason for the cuts.
The bank’s growth also continues to be restricted by an unprecedented cap the Federal Reserve placed on it this year. Citing “widespread consumer abuses,” the Fed said Wells cannot exceeding the roughly $1.95 trillion in assets it had at the end of 2017 until it improves on governance and controls.
Wells Fargo has taken steps to improve its image, including with a nationwide advertising campaign launched in May that uses the tag “Re-established 2018.”
But the bank continues to stumble.
In August, it apologized for an internal error that it said caused more than 600 customers to be incorrectly rejected for, or not offered, modifications to make their home mortgages more affordable. About 400 of those people ultimately lost their homes to foreclosure after its error, Wells said.
Speaking last Friday at an investor conference in New York, Chief Financial Officer John Shrewsberry said he expects commercial and industrial loans and commercial real estate loans to fall from their levels in the second quarter of this year. He said the bank’s image might be one factor.
“As we’ve experienced in other (Wells Fargo) businesses, while reputational issues have not impacted relationships with existing customers, they may have slowed some new customer activity,” he said.
Wells Fargo’s stock performance continues to lag that of its peers. Since Sloan took over in October 2016, Wells’ stock price has risen about 23 percent, compared with a roughly 51 percent increase in the KBW Bank Index, which tracks shares of 24 large U.S. banks.
Over the same period, Bank of America’s stock price has climbed about 95 percent and JPMorgan Chase’s has increased about 74 percent.
Thursday’s move is reminiscent of Bank of America’s announcement in 2011 that the Charlotte-based bank would cut about 30,000 jobs in a companywide cost-cutting program known as Project New BAC.
Bank of America has eliminated tens of thousands of jobs since CEO Brian Moynihan began heading the bank in 2010.
But Wells Fargo has held its workforce relatively steady over that period.
Wells, which established its large hub in Charlotte when it acquired Charlotte-based Wachovia in 2008, has continued to grow its employment in the region since that purchase. It continues to employ more people in the metro area than Bank of America’s roughly 15,000.
In the press release, Sloan said the bank has programs to help workers affected by the job cuts locate other employment at the bank. Even with the cuts, Wells will remain one of the largest employers in the U.S., he said.
“Wells Fargo takes very seriously any change that involves its team members, and as always, we will be thoughtful and transparent, and treat team members with respect,” Sloan said.
One Wall Street critic pointed out that Wells Fargo is getting rid of jobs after receiving a large cut in its taxes under a federal tax overhaul passed by Congress last year.
“You have to ask yourself: just what kind of behavior are we rewarding with our tax dollars?” said Porter McConnell with the group Americans for Financial Reform.