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July 09, 2020 at 04:29 PM
A Wells Fargo branch in New York (Photo: Bloomberg)
Wells Fargo & Co., the largest employer among U.S. banks, is preparing to cut thousands of jobs starting later this year, potentially setting a bleak precedent for an industry that’s been resisting mass layoffs as the coronavirus pandemic worsens.
Pressure to dramatically reduce costs is coming to a head inside the bank, prompting executives to draft plans that may ultimately eliminate tens of thousands of positions, people with knowledge of the confidential talks said, asking not to be named.
Some analysts predict the lender may post its first quarterly loss in more than a decade next week, when the firm is set to reveal how much it’s lowering its dividend following Federal Reserve stress tests.
Though the strains at Wells Fargo are more acute than at rivals, any cuts would reverberate across an industry facing mounting loan losses.
Reductions by such a prominent firm could test the resolve of competitors that pledged to provide job security for their massive workforces, and in turn, a bulwark for the nation’s economy.
A spokesperson for the San Francisco-based bank declined to comment. Shares of the lender fell 1.7% to $24.14 at 9:55 a.m. in New York. The stock is down 55% this year.
Shrinking Workforce
Executives haven’t yet adopted a specific target for shrinking the bank’s workforce of about 263,000, and they aren’t likely to detail a plan when posting quarterly results, one of the people said.
Yet among analysts and investors, Chief Executive Officer Charlie Scharf already has made little secret of his concern about costs, calling them “way too high” during a presentation in May.
The firm is significantly less efficient than its largest competitors, a situation that’s been exacerbated by years of regulatory probes and sanctions, and now the pandemic.
Last month, Scharf acknowledged the company would lower its dividend in response to stress tests and its own dimming assumptions about the economic outlook, which he noted had “changed significantly” in recent months.
