Thread regarding Wells Fargo & Co. layoffs

Considering close to half the employees came over from Wachovia, it wouldn’t be a surprise.

Getting ready to post first quarterly loss in over a decade/ cutting dividend/ not passing stress test. Nothing to see here folks....

Big difference with record deposits when WFC is making nothing in overnight sweep interest. They tried to make themselves out as the golden child in 2008-2009, even stating they needed no tarp money. Yet they were the dirtiest player at the table, just nobody knew. The reckoning is here

I wouldn’t rule it out 100%. We were already having serious issues coming into the pandemic, similar to Wachovia going in to the housing crisis. We might have been able to work through it in different times. However, potentially bad loan portfolios + an unstable management team in the penalty box with the regulators + a low interest rate environment which makes it difficult for even a healthy bank to make money + an outdated business model + the k–l shot of a pandemic potentially leading to a recession/depression could conceivably = a lack of confidence in the bank and a run on Wells Fargo. It does, in some ways, give me Wachovia vibes.

A failure of a bank this size is highly unlikely due its size. We will have larger issues as a country if that happened to JPM, BAC, C, or WFC. If the bank were regional, all bets are off. In the past, we prided ourselves as being the largest CRE, main street, middle market, etc. lender. I think the pandemic will alter the bank's strategy in this regard.

The asset cap, high eff. ratio, and low interest rates will certainly lead to reduced salaries. Think of it this way: If you owned your small business and weren't making the money you have been accustomed to, what would you do? Most likely, you would reduce (or eliminate) the hours of your workers and look to work with cheaper priced vendors to limit the reduction in your compensation (dividends). The same is happening now.

WFC changing the 3rd party vendors its working with, eliminating/streamlining functions, and you can see that new roles dont pay as much. Bonuses will likely be lower in March too. When Charlie talks about the dividend cut, he will have to tell the investors that he is eliminating XX in expenses to justify that everyone is feeling the pain of the current environment for the benefit of WFC long term.

The difference is that team members are short term, while the investors are long term.

i am thinking banking is the wrong industry to be in right now; probably need to look in industries that are having success even during this time

Good post below, I’ll just add that you should always remember that anything is possible.

Plenty of people scoff at business continuity plans and testing, then get caught flat footed by a global pandemic.

Wachovia failure was because there was a silent bank run.

Right now, Wells Fargo actually has record deposits, its opposite the Wachovia problem in that regard.

But Wells Fargo can fail another way - if the banks loan portfolio drops below a critical leverage level.

On Apr 1 (yes april fools) the fed lowered this:

The supplementary leverage ratio generally applies to financial institutions with more than $250 billion in total consolidated assets. It requires them to hold a minimum ratio of 3 percent, measured against their total leverage exposure, with more stringent requirements for the largest and most systemic financial institutions. The change would temporarily decrease tier 1 capital requirements of holding companies by approximately 2 percent in aggregate.

Will they fail/can they fail/when would they fail?

The fed was concerned enough to lower leverage ratio almost down to zero.

Also Wells Fargo has:

Stopped lending new student loans

Stopped lending to home equity loans

Slowed/stopped loans they cant sell to the fed (jumbo loans)

Ended private auto dealer lending

Pulled back commercial loan lines and credit card lines

Will cut/suspend its dividend next week

Will announce massive layoffs.

Will Wells Fargo fail like wachovia? If there is another run on the bank, ya, probably.

But its more likely it would fail due to an economic depression which will cause the bank a massive load of bad loans.

But both are equally possible i suppose?

My bet is the next two quarters in the financial industry are gonna be kinda interesting.

Wells Fargo has already failed unlike any corporation in recent history. There’s no comparing the two. One was ruin by ignorance, the other by immoral criminals