Wells Fargo & Co. (NYSE: WFC) is rolling out big job cuts — cuts that will span business lines and geographic areas.
Recently, Wells Fargo shaved more than 700 jobs in commercial banking, according to a Bloomberg report, citing people with knowledge of the matter. Those layoffs affected employees across the division, the report said. The bank would not comment on if there were cuts in Charlotte or how many.
Commercial banking is for clients with more than $5 million in annual sales. It includes middle-market banking, commercial capital and treasury management.
It appears these are the first of many cuts to come.
A previous report estimated potential job cuts into the tens of thousands. Bank analyst D–k Bove also believes it will likely be in the thousands. He expects the bank to go through its business lines and remove the subsectors that deliver the least returns. He noted businesses typically eliminate entire groups, rather than leaving some employees behind.
Wells Fargo used to tout its wide-ranging company, Bove said. However, that expansive structure didn't help matters when the fake-accounts scandal broke in 2016.
CEO Charles Scharf is now wrapping up his first year in the top role. He has already made aggressive changes at the bank, with more promised in the near future. In February, he announced the bank's split into five parts: Consumer and Small Business Banking, Commercial Banking, Corporate and Investment Banking, Wealth and Investment Management, and Consumer Lending.
Wells Fargo did confirm the impending reductions, which it says will happen through attrition, displacement and eliminated open positions. The bank said the changes will make it more streamlined and customer-focused.
"We will have impacts, including job reductions, in most geographies across our footprint and nearly all of our functions and business lines, including Commercial Banking where we have started displacements," Wells Fargo said in a statement to the Charlotte Business Journal. "We are executing this work in a thoughtful and deliberate manner, and we will communicate openly and honestly with impacted employees and provide severance, career assistance and other services to assist them."
San Francisco-based Wells Fargo is Charlotte's third-largest bank based on deposits. It has its largest employment hub here, with roughly 27,500 employees.
Tom Brown, CEO of Second Curve Capital, expects the cuts to happen in waves. He said he doesn't think the bank is assessing this by geographic area. It's more about the business lines and optimizing each one.
The bank might look at market costs of living, said Gerard Cassidy, analyst at RBC Capital Markets. That could bode well for Charlotte in the long term.
Bove predicts more cuts in asset management. He said Wells Fargo has not distinguished itself in capital markets or overseas lending. A high branch count is another problem. The bank, as are many companies, is eliminating in-person positions that can be replaced with technology, he added.
"(Scharf is) going to be tough. He's going to be arrogant, and he's going to be causing a lot of people to lose their jobs," Bove said.
Wells Fargo is making a big push to lower expenses.
In July, Scharf noted a needed $10 billion reduction in annual expenses. Annual expenses came to $58.2 billion in 2019, as compared to the bank's target of $52 billion to $53 billion. It suspended expense targets for this year. Brown views the $10 billion mark as more of a concept, rather than a set number. All banks are being tougher on expenses, considering this year's pandemic and its economic effects.
Analysts are expecting a larger company announcement as soon as next week, Cassidy said.
Wells Fargo is set to report third-quarter earnings on Wednesday. The bank suffered its first loss in the second quarter since the last financial crisis.
Cassidy said now is an optimal time to make changes. Scharf needs a full team in place to drive a plan forward. He has brought in multiple executives with ties to New York banks. Incoming CFO Mike Santomassimo, for example, was from BNY Mellon (NYSE: BK). He is starting this fall. A restructuring charge would also go better on this year's balance sheet, Cassidy said. It would allow the bank a fresh start in 2021.
Brown remains confident in Scharf's ability to fix the problems: "If he doesn't have the chops to turn this around, then we as a country have a big problem."