Sen. Elizabeth Warren grills Wells Fargo CEO: ‘You should be fired’
Wells Fargo said Tuesday that it slashed thousands of jobs last year by shedding management positions, centralizing functions and other steps — and that more cuts are in store for 2019.
Wells, which has its largest employment hub is in Charlotte, announced plans last year to trim employment companywide by about 5 to 10 percent over a three-year period to operate more efficiently. On Tuesday, the San Francisco-based bank said it has cut jobs in its branches, call centers, mortgage operations and other areas where it expects additional reductions this year.
The bank made the disclosures as it reported financial results for the last three months of 2018. Also Tuesday, Wells announced that it expects to remain under a Federal Reserve cap that limits its growth through the end of this year — longer than the bank previously expected.
The job cuts come as Wells grapples with a series of scandals that have tarnished its reputation, cost it businesses and driven up its costs.
Wells said it made $6.1 billion in profit in the fourth quarter of last year, down 1 percent from a year ago. Revenues fell by 5 percent, with declines logged in all of its major business segments.
A Wells Fargo spokesman said the company would not detail where job cuts have happened or will occur. The bank also did not disclose how many jobs it planned to cut this year.
Wells’ biggest jobs reduction affected its home-lending operations, where the bank said it cut more than 5,000 jobs by streamlining. Other reductions included more than 3,300 managers, 2,800 branch jobs and 1,500 wholesale-banking positions, Wells said.
Across the Charlotte metro area, Wells Fargo employs about 25,500 workers, more than Bank of America’s roughly 15,000. Bank of America is headquartered in Charlotte.
Under previously disclosed plans, Wells Fargo has said it wants to lower expenses by billions of dollars through 2020.
One focus has been branches as customers rely on them less and increasingly use online banking. On Tuesday, Wells said it had 5,518 branches, down 343 from a year ago as it shed locations.
CEO Tim Sloan said Tuesday that if the bank sees more opportunities to save money, it will take them. The bank could also seek to cut more costs if revenues drop, he said.
“But when we look at the economy today, and we look at our performance for the fourth quarter, we feel cautiously optimistic about 2019,” Sloan said.
Investors have been keeping a close eye on Wells Fargo’s financial performance as it recovers from its scandals.
Those began in 2016 with accusations that the bank’s employees created millions of unauthorized customer accounts to meet aggressive sales goals. Since then, Wells has disclosed customer harm in other areas, including mortgage and auto lending, foreign exchange, wealth management and add-on products like identity theft protection.
The bank on Tuesday pointed to bright spots in its financial results, including year-over-year growth in primary consumer-checking customers, consumer credit card accounts, and debit and credit card usage.
But Wells continues to be outperformed by its peers on key metrics, even as the industry is buoyed by 2017’s federal tax cuts, an improving U.S. economy and rising interest rates that have allowed banks to charge borrowers more.
Last year, Wells’ shares fell more than 24 percent compared with a nearly 20 percent declined in the KBW Bank Index, which tracks shares of 24 large U.S. banks, including Bank of America and JPMorgan Chase.
JPMorgan on Tuesday said profit rose 33 percent last year, setting a record, and that it also made record revenue. Bank of America reports its results for last year on Wednesday, but it has already said it made record profit in the first half of 2018.
Wells Fargo did not set any records for profits or revenue last year. On Tuesday, it said its annual profit of $22.4 billion was up only 1 percent from 2017.
Impact of scandals
Kyle Sanders, a bank analyst at Edward Jones, said Wells Fargo’s performance reflects the impact of its scandals, which have resulted in costly legal settlements and increased legal expenses. Just last month, the bank agreed to pay $575 million to resolve investigations by all 50 states and Washington, D.C., into the unauthorized accounts and a range of other practices.
Meanwhile, Wells has lost revenue from selling business lines to focus on its core banking products and services, Sanders said.
As a result, Wells did not experience record profits last year, Sanders said.
In an unprecedented move, the Federal Reserve in February placed a cap on Wells’ growth until the bank improves its governance and controls. In taking the step, the regulator cited “widespread consumer abuses and other compliance breakdowns” at Wells.
On Tuesday, Sloan said he expects the cap to stay in place through the end of the year. Previously, he said that he expected the restriction to be lifted in the first half of the year.
The banks shares fell less than 1 percent Tuesday, closing at $47.67.
In explaining the extension, Sloan said the bank needed more time to implement improvement plans it submitted to the Fed and conduct Fed-required reviews of the improvements by independent, outside experts.
On Tuesday, Wells said its average deposits fell by $1.3 trillion, or 3 percent, in the fourth quarter from a year ago because of actions it took to manage to the cap.
Sloan said that even with the cap in place longer, the bank will continue to be able to serve customers. “Our growth in both loans and deposits in the fourth quarter demonstrated our ability to do so,” he said.
Sanders, the analyst, who has a buy rating on Wells’ shares, said he believes the cap is manageable for Wells for now. But if it’s still in place going into next year, it could impact employment at the bank, he said.
“You would see an acceleration of layoffs,” he said, “i.e., cut more cost to offset less revenue.”