Wells Fargo & Co. plans to trim its workforce by about 5 percent to 10 percent within three years as Chief Executive Officer Tim Sloan works to pull the bank clear of customer-abuse scandals and prop up a lagging stock price.
Sloan, who made the announcement to employees at a town-hall meeting on Thursday, has reduced headcount as he cleans up the bank and streamlines operations. The San Francisco-based lender is struggling to grow under the weight of a Federal Reserve assets cap. It had 265,000 employees as of June 30, according to a regulatory filing.
“It says something about the revenue environment for them,” Charles Peabody, an analyst at Portales Partners, said in an interview. “If they’re not in the midst of recognizing that revenues are in trouble, they’re anticipating it.”
Wells Fargo says it is reducing expenses amid regulatory fines and higher legal costs stemming from the string of customer abuses that erupted in 2016. The bank has pledged $4 billion in reductions by the end of next year.
“We are continuing to transform Wells Fargo to deliver what customers want — including innovative, customer-friendly products and services — and evolving our business model to meet those needs in a more streamlined and efficient manner,” Sloan said in a statement.
The cuts announced Thursday are part of the previously provided year-end expense targets for 2018, 2019 and 2020, according to company spokesman Peter Gilchrist. Chief Financial Officer John Shrewsberry said at a conference earlier this month that Wells Fargo is on track to achieve the 2018 target.
Sloan, who took the helm almost two years ago during a scandal over falsified accounts, has shuffled executives and reworked internal controls while traveling the country to espouse a commitment to customer service.
By a number of yardsticks, he hasn’t yet persuaded investors that the firm is recovering. While the stock has climbed 23 percent since Sloan became CEO, it’s trailing the 53 percent advance of the broader KBW Bank Index. Rivals JPMorgan Chase & Co. and Bank of America Corp. are up 75 percent and 95 percent, respectively.
Wells Fargo gained almost 1 percent to $55.68 at 3:22 p.m. in New York trading. It has declined 8.2 percent this year.
Analysts cut their estimates for Wells Fargo earnings again and again after the Fed punished the bank with an unprecedented cap on growing assets. The analysts began this year predicting a record $24 billion annual profit, and now the average estimate is for less than $21 billion, the weakest since 2012.
Speculation that the bank wants a new CEO spilled into public this week when the New York Post said the board had approached former Goldman Sachs Group Inc. executive Gary Cohn. Cohn, who earlier this year finished a stint as a White House adviser, denied the report, as did Wells Fargo Chair Betsy Duke, who said Sloan “has the unanimous support of the board, and this support has never wavered.”
– With assistance from Daniel Taub.
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