Wells Fargo & Company’s WFC chief executive officer, Charlie Scharf stated that the company is expecting to keep aside $750 million to less than $1 billion for severance expenses in the fourth quarter of 2023. The announcement was made at the Goldman Sachs conference.
However, the exact number of job cuts was not mentioned. The elimination of job positions is a harsh step that has to be undertaken by Wells Fargo to reduce expenses amid a tough operating backdrop for revenue growth. The lower staff attrition rate, rising funding costs and expectations of loan losses make it essential for banks to monitor its internal actions to preserve returns.
Elucidating on the job cuts, Scharf added, “We're focused on efficiency, we're focused on just our processes, and how we can eliminate duplication and simplify the company.”
Per CNBC, WFC actively conducted layoffs through the first nine months of 2023, eliminating around 11,300 job positions. As of Sep 30, the company had 227,363 employees, down 5% from a year ago quarter.
Per Financial Times article, the bank specifically spent $186 million on severance costs in third-quarter 2023 eliminating around 7,000 positions. Hence, it is anticipated that the announced severance expense would involve approximately 10,000 additional layoffs.
Last month, Bloomberg said Wells Fargo will layoff of less than 50 bankers from its corporate and investment banking (IB) segment as part of year-end pruning. Particularly, the job cuts involved a number of managing director positions and more junior roles.
Apart from this, WFC has been facing legal hassles over the years. In September 2016, the opening of millions of unauthorized accounts along with issues in its auto-insurance business, online bill pay services, and the Wealth and Investment Management segment was revealed. Since then, the bank has been slapped with numerous penalties and sanctions including a cap on the asset position by Federal Reserve.
Wells Fargo’s shares have risen 5% in the past six months compared with the industry’s growth of 7.1%.
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WFC presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Job Cuts by Other Firms in Finance Space
Last month, Citigroup Inc. C commenced the elimination of various job positions as part of its major organizational overhaul process. Per a Yahoo Finance’s article quoting Bloomberg, the job cuts involve approximately 10% of Citigroup’s senior manager roles aggregating to around 300 managers.
C’s press release said, “Today we shared with our colleagues the next layer of changes across many of our businesses and functions as we continue to align Citi’s organizational structure with our new, simplified operating model. As we’ve acknowledged, the actions we’re taking to reorganize the firm involve some difficult, consequential decisions, but we believe they are the right steps to align our structure with our strategy and ensure we consistently deliver excellence to our clients”.
In November 2023, Barclays PLC BCS planned to reduce expenses by $1.25 billion through the elimination of around 1,500-2,000 jobs, specifically in its segment, Group Execution Services, known as BX. This was reported by Reuters that quoted a person with direct knowledge of the proposals.
BCS operates through two divisions - Barclays UK and Barclays International. BX is a group-wide service company that offers support to both the divisions by providing technology, operations and functional services across the Group.
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