Dive Brief:
- Wells Fargo is drafting plans that could cut tens of thousands of jobs starting this year, people familiar with confidential talks told Bloomberg. Executives haven’t decided on a specific number, one of the people said. A source confirmed the possible cuts to the Financial Times, but said no decision had been made. The bank declined to comment Thursday.
- Wells was among several U.S. banks in March to commit to halting any planned layoffs as the coronavirus pandemic took hold. But while Morgan Stanley and Bank of America, for example, pledged to forgo any staff cuts for all of 2020, the nation’s fourth-largest bank was more measured. “We have paused initiating new displacements,” Beth Richek, a Wells Fargo spokeswoman, said in March. “We will continue to evaluate during this fluid situation.” The bank’s freeze expires this month, but may be extended, Bloomberg reported.
- CEO Charlie Scharf, in his first quarterly earnings call at the bank’s helm, said the bank may take “much of this year” to review the budget and broader business. “There are still big parts of the company where we are extraordinarily inefficient,” he said. “We want to be able to think with as clean a sheet as possible about how we should be spending our money.”
Dive Insight:
Potential upcoming job cuts at Wells shouldn’t entirely be a surprise. CFO John Shrewsberry said during a virtual conference last month, “There will come a time, and I assume at some point this year, when we get back to executing on programs that are in place and some that are still under development that are designed to get our total expense base, which for us means our total headcount, to as lean a state as we can reasonably operate.”
The bank is also gearing up to release its second-quarter earnings Tuesday. It ended last year with its net income at a nine-year low, then the same benchmark dropped a further 89% in this year’s first quarter as COVID-19 ground the economy to a halt.
“Not every financial institution came into this tumultuous time period on really sound footing, and those problems haven’t gone away because of the pandemic,” Andy Challenger, senior vice president at staffing adviser Challenger, Gray & Christmas, told Bloomberg.
Losses in the second quarter stand to be deeper. “We’ve got a full three months of the pandemic coming through the numbers now,” Kyle Sanders, an analyst at Edward Jones, told Bloomberg. “The first quarter was rough, but it really only reflected a couple of weeks in March.”
Layoffs may be the single step to save the bank the most money. Scharf said during a May presentation that costs are “way too high.” Wells Fargo’s 263,000-employee headcount surpasses even JPMorgan Chase’s, yet Chase registered $30 billion more last year in revenue, Bloomberg reported.
Challenger said an announcement of job cuts at Wells could prompt…
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