Skip to main content
You are the owner of this article.
You have permission to edit this article.
Wells Fargo unveils $8 billion cost-cutting plan including more workforce, branch reductions

Wells Fargo unveils $8 billion cost-cutting plan including more workforce, branch reductions


Wells Fargo & Co. unveiled Friday an $8 billion expense-reduction plan expected to take up to four years to complete.

Much of the savings involves eliminating management layers, making additional branch and workforce cuts, and reducing by up to 20% its office space by the end of 2024.

The bank said it has more than 250 "efficiency initiatives" involved in the restructuring.

However, analysts don't expect the initiative to result in Wells Fargo exiting this year the $1.9 trillion asset cap set by the Federal Reserve since Feb. 3, 2018.

Wells Fargo has been facing investor and political pressure over its response — or lack thereof — to regulatory orders addressing its fraudulent customer-account scandal that surfaced in September 2016.

Chief executive Charlie Scharf told analysts he believes the bank is making progress on addressing federal regulators' concerns about its current and future operations.

"We are focused on getting the work done properly and believe we’re making progress," Scharf said.

"However, there remains a significant amount of work to do and a series of steps required by the consent order, requiring both successful execution and implementation by us, and ultimately, a determination by the Federal Reserve as to when the work has been completed to their satisfaction."

When pressed by analysts for an exiting projection, Scharf said that "I’m just not in a position to put the time frame around it, other than I feel very confident that we know what has to get done and we’re moving forward."

"I wish I could be more specific than that," he said.

Cost-cutting steps

Nearly half of the $8 billion goal, or $3.7 billion in annual cost savings, is projected to be achieved in fiscal 2021.

Some of the cost-cutting steps began in 2020, such as:

• Eliminating "one to two layers of management across business and functions" since May.

• Closing 329 branches with plans to close another 250 during 2021.

Wells Fargo has dropped from about 6,600 branches in 2009, when it acquired a collapsing Wachovia Corp. and gained an East Coast presence, to 5,032 as of Dec. 31.

The 2020 branch closings reduced the bank's branch workforce by 20%.

Wells Fargo listed having 268,531 employees on Dec. 31, down from 274,931 on Sept. 30 and from 271,924 on Dec. 31. 2020.

From the third to fourth quarters, there was a 6,482 reduction in consumer banking/retail jobs to 125,034, along with 1,681 in commercial banking to 22,41, 714 in wealth and investment banking to 29,515, and 27 in corporate and investment banking to 8,178.

There was a net gain of 2,504 in the corporate workforce to 83,394.

• Increase automation of home lending services.

The bank said about 73% of home lending’s applications during the fourth quarter were sourced through its online mortgage application too.

• Shrink from 13 to six commercial banking lending platforms that also will contribute to cutting job positions.

• Reducing its 46 million square feet of office space by up to 20%, or by 9.2 million square feet, by the end of 2024.

Some of the reduction is related to what the bank calls underutilization because of COVID-19 work-from-home policies.

Altogether, Wells Fargo said 35% of the cost savings would come from organizational structure optimization, 20% from branch closings, 14% from consumer lending changes, 13% from commercial banking changes, 10% in the "other" category, and 8% from reducing its office space.

More to come?

Scharf cautioned that the $8 billion initiative is not an exhaustive list of cost cutting.

"Once you get a series of efficiencies, it helps you look at everything else that’s left as well," Scharf said.

"We’re confident that there’ll be more after that, which will help continue this multiyear drive to get to what we think is a reasonable efficiency level."

Scharf acknowledged some analytical criticism that it has taken Wells Fargo longer to pursue significant cost savings than some of its peers.

"First of all, it took them years to get there," Scharf said. "That’s why it will take us a fair amount of time as well."

Mike Santomassimo, Wells Fargo's chief financial officer, told analysts that "we are not forgoing opportunities with good returns to grow revenue even if they may increase expenses."

"We are targeting net expense reductions each year and our restructuring charges become clear, we will build our growth plans — and as we build our growth plans each year, we will provide further details."

Deeper segment details

Wells Fargo revamped the financial reporting of its primary business segments to provide more details about their quarterly performances.

The segments are: corporate; consumer banking and lending; commercial banking; corporate and investment banking; and wealth and investment management.

"We've made meaningful changes to our external reporting with the goal of giving our investors a clear understanding of our results, as well as the ability to compare our businesses on a more like-for-like basis to competitors, and track our performance as we do internally," Scharf said.

"What you see now is what we’ve been reviewing internally. Our strengths and weaknesses should be clear to you than ever, but the potential for improvement should also be clear."



Concerned about COVID-19?

* I understand and agree that registration on or use of this site constitutes agreement to its user agreement and privacy policy.

Related to this story

Most Popular

Get up-to-the-minute news sent straight to your device.


Breaking News