San Francisco, California, USA : Troubled Wells Fargo, which earlier said it will close 300 branches, announced plans on Thursday to cut five to 10 percent of its workforce in the next three years, a move that would affect up to 26,500 jobs based on current headcount.
The bank, which has struggled to regain its footing following a series of scandals, said the job cuts and attrition would make the company more efficient at a time when more customers are banking on digital platforms.
“We are continuing to transform Wells Fargo to deliver what customers want” which includes “evolving our business model to meet those needs in a more streamlined and efficient manner,” Sloan said.
He said the bank will support laid off workers including pointing them towards other posts within Wells Fargo.
Large banks have been closing branches amid the increasing shift to online banking. In July, Wells Fargo, which is a major player in mortgages in the US where most of its business is based, said it planned to close 300 offices in 2018, in addition to divestitures of 52 branches in four Midwestern states.
In the second quarter, the bank experienced a five percent drop in teller and ATM transactions, while digital sessions increased 17 percent from the year-ago period, executives said in July.
Wells Fargo also has been stymied by a series of scandals, especially revelations in 2016 that the company opened millions of phony deposit accounts and lines of credit without clients’ knowledge as part of high-pressure retail sales tactics.
Since that scandal, the bank has replaced its chief executive, revamped its payment incentive system and added staff to oversee governance.
However, some of these measures have added to costs, denting Wells Fargo profit margins compared with other large banks. The bank reported a drop in overall loans and deposits in the second quarter.
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.
Following the announcement, shares of Wells Fargo rose 0.7 percent to $55.60 in afternoon trading.
Below is the Wells Fargo Statement:
Wells Fargo & Company (NYSE: WFC) Chief Executive Officer Tim Sloan today shared progress with team members on the company’s ongoing transformation, which addresses industry trends and changes in customer behavior, during a regularly scheduled companywide town hall meeting.
Sloan, who hosts bi-monthly town halls broadcast live to all team members, noted that through these efforts, Wells Fargo is continuing to make fundamental changes designed to make the company more customer-focused, streamlined, and better positioned for long-term success and operational excellence. This work includes strengthening risk management, simplifying operations, leveraging digital automation, divesting non-core businesses, and continuing to become a more efficient company.
“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,” said Sloan.
Given changing customer preferences, including the accelerating adoption of digital self-service capabilities, the focus on operational excellence, and ongoing commitment to efficiency, the company expects headcount to decline by approximately 5 to 10 percent within the next three years. This decline would reflect displacements as well as normal team member attrition over that period.
“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,” said Sloan. “We have robust programs to make impacted team members aware of other job opportunities within Wells Fargo and provide support as they transition to the next phase of their careers. And even as we become more efficient, Wells Fargo will remain one of the largest employers in the United States.”
In the last two years, Wells Fargo has already made significant progress to become more customer-focused and efficient by:
- Creating a simpler and more collaborative company by aligning like work into centers of excellence, standardizing processes and capabilities, and eliminating redundancies.
- Investing for the future by prioritizing spending to improve the customer experience, delivering innovative products and services to customers, and strengthening its risk management and compliance capabilities.
- Adding value for customers through its focus on innovation and customer-friendly services, such as zero-balance alerts and Overdraft RewindSM, which help customers avoid overdraft fees.
“We are addressing past issues, enhancing our focus on customers, strengthening risk management and controls, simplifying our organization, and improving the team member experience – all in the spirit of building a better Wells Fargo for our customers,” said Sloan.
Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investment and mortgage products and services, as well as consumer and commercial finance, through 8,050 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 38 countries and territories to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 26 on Fortune’s 2018 rankings of America’s largest corporations.