Wells Fargo pledges $8bn in cost cuts

Thoughts? Here’s the article link but in case a paywall pops up here’s the content below:

https://www.ft.com/content/0df637b6-9a1f-45bf-ac65-598418da28a8

Wells Fargo said on Friday it could cut $8bn from its cost base over the next three to four years, finally giving tangible targets for an efficiency drive that has been in progress for more than a year under chief executive Charlie Scharf.
Announcing a modest increase in fourth-quarter profits fuelled by the release of $757m in loan loss reserves, America’s fourth-largest bank by assets told investors it was advancing on more than 250 “efficiency initiatives”, which could yield $8bn in spending cuts on a gross basis.
“I wouldn’t confuse our recent underperformance with our great franchise value, and how our business fits together to put us in a great competitive position,” said Mr Scharf, who vowed to restore the bank’s fortunes after becoming chief executive in September 2019.
Wells Fargo has struggled to recover from a 2016 mis-selling scandal and continues to operate under a balance sheet cap imposed by regulators as a punishment.
The efficiency drive includes slashing 250 branches in 2021 — on top of the 329 closed last year — eliminating layers of management and reducing its real estate footprint by up to a fifth.
The bank did not outline how many of its staff would lose their jobs. Its latest earnings show headcount fell by 6,400 in the last three months of the year, leaving the lender with just over 268,500 on its payroll in December.
Kyle Sanders, an analyst at Raymond James, said Wells Fargo’s efficiency drive “would represent a 14 per cent reduction from 2020 expense levels, which could provide a meaningful lift to long-term profitability”.
Mr Scharf told analysts the bank was “exploring options” for its asset management and corporate trust businesses, and its rail leasing portfolio. It is targeting a return on equity of about 10 per cent in the longer-term versus the 8 per cent it posted for the fourth quarter.
The bank reported net income of $3bn for the fourth quarter, up about 4 per cent on the same period in 2019. Earnings per share were 64 cents, higher than the 59 cents expected by analysts in a Bloomberg poll. Revenues for the quarter came in at $17.9bn, versus $19.9bn a year ago.
Restructuring charges took another $781m out of earnings in the fourth quarter. Net interest income fell 17 per cent year on year, to $9.28bn. Lending margins recovered slightly relative to the third quarter, reflecting a small rise in US benchmark interest rates, which are still near historic lows.
Loan loss charges were a bright spot. After booking more than $10bn in the first nine months of the year, Wells Fargo recorded a $179m gain for loan loss provisions in the fourth quarter, largely because it released reserves related to a student loan portfolio which it is selling.
The higher than expected profits make it more likely that Wells Fargo will buy back shares in the first quarter, since share repurchases are capped by banks’ recent earnings. The lender said its board had approved the buyback of an additional 500m shares, but did not signal imminent plans to go ahead with the plan.
The bank’s shares dropped 7.5 per cent to $32.16 in Friday trading.
Wells Fargo reported a 56 per cent fall in net income in the third quarter, a steeper drop than rivals Citigroup, Bank of America and JPMorgan Chase, as lower interest rates compressed lending margins while restructuring charges pushed up costs.
The lender has a smaller investment bank than its rivals, so it has enjoyed fewer spoils from 2020’s trading, dealmaking and fundraising booms.

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Attrition rates are about 50 or so every single day.

And its somewhat random, but skewed heavily against high cost center (cali) staff.

I've never seen spans and layers like Wells Fargo has. You literally have kinda-senior managers (think someone that is four-deep from Charlie) who then have pretend managers on top of that. Often times in IC roles, which means they are also not filling the role that they should be.

It's a joke.

Earning report wasn’t that bad, I’m sure WF will do better this year after cutting some costs

So let me get this straight, on the one hand pledging to cut 8 bill in expenses while authorizing the repurchase of 500 mill shares, which amounts to 16 bill. Yep, makes complete sense

Post ID: @1dch+18UKMD7C hit the nail on the head. Spans and Layers are totally out of control here. Few managers really understand and could do their subordinates jobs, and those that do are generally at the lowest rungs of management. From above first line supervisors all the way up to directors it’s all connections, appearances, political skill and who you know. As far as the span of any one manager’s control, the entire team knows who carries the team and who is there solely due to upward connections and politics.

There is honestly not a lot of thinking needed to cut 5 layers out of 12.

I love how so many purported team members here consider everyone else the dead weight.

the other thread calculated 50k left to go, too much dead weight and people doing nothing and getting paid;

I agree with the other poster that said to eliminate middle management so can get rid of the pets that do nothing and get paid for decades. No other company wants the dead weight either.

They need to cut redundant middle management quickly and eliminate cronyism. Charlie should have replaced all leaders in the 5 main businesses up to 3-4 levels down from him. We would see an acceleration in deadweight out of WFB. Until then, random people will report to random managers to save "well liked" people of middle management.

Since aug. we have lost 10k, so at the rate and if their target is say 25k, we have all of this year with mass amounts of people being let go each month. Personally, I think they will get rid around 35k. Lots of trees need to be culled.

$8 Billion? Here’s $1 Billion, you got your sharpened pencil ready Mike? Eliminate the Executive Committee, save $2 billion. The extra $1 billion is saved on the cost of benefits including private plane travel, coffee, shoe polish, etc.

Chainsaw needs to cut the lazy dead weight, that is a lot of people here.

Thing is seems these are the one's he keeps. Not sure that is very smart

Charlie is doing what has to be done

Wells needs to get lean and mean

I don’t get the “finally giving a tangible target” reference. They’ve been saying $10B in cost costs for quite some time now, and as the article said they’ve done about 1.5B of that so far.

Automation Automation and Automation .. There are so many manual processes that can be automated .. Does that mean layoff - NO. We could use our expertise in solving more challenging problems .. BUT, that's not happening right now due to a lot of manual work!

@cqn+18Vgm4aW you exhibit little knowledge of the world or how things work.

But good for you showing so much confidence in your ignorance.

We are nowhere close to the 26,000 layoffs announced before Covid. Cuts were put on hold in early 2020 because other banks were promising no layoffs, and Wells didn’t want to be seen as the only one kicking people to the curb in a pandemic. They did a few cuts in the last quarter, but nowhere near the number promised.

Layoffs are needed. Wells is overstaffed with overpaid people.

It's that easy. If you can get your current comp elsewhere, then there should be little/no worry.

If you can't, that's your sign that you're overpaid and should acquire new/better skills ASAP.

Cost cutting always mean less people.

There will be massive layoffs.

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Wells Fargo pledges $8bn in cost cuts

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