Wells Fargo CEO Charles Scharf this week said that the bank will slash expenses across various operations, reduce its corporate real estate, simplify products, move clients and employees to digital solutions, and shed certain business lines.
In the third quarter, Wells Fargo posted $15.2 billion in noninterest expenses, up 5% from the prior quarter and unchanged year-over-year, according to the publication. Scharf said in July that the company’s expenses were “at least $10 billion higher than they should be,” FA-IQ sister publication Ignites writes.
On Wednesday, during a earnings call with analysts, Scharf said Wells Fargo will end up saving $1 billion on gross expenses, thanks to restructuring changes put in place last quarter, according to Ignites.
In the quarter ending September 30, the firm posted $718 million in restructuring charges, which puts it on track to save $1 billion in gross run rate expenses each year starting in 2021, the publication writes, citing the company’s earnings report.
Now, Wells Fargo’s executives are looking at various short- and long-term initiatives to cut costs even further, Scharf said. He did not specify a target as far as how much the firm wants to save.
"I understand that many of you would like more specifics on our plans," he said, noting that the bank is still in its 2021 planning cycle. "We need to be thorough in our work," he said, noting that the bank is working though the details of timing, the impact on operational and financial performance and controlling risk to satisfy regulatroy needs. "I cannot stress the importance of this work enough. We cannot and will not do anything to jeopardize this work."
In the short term, Wells Fargo also plans to examine and "streamline" its layers of management. it has also cut spending on contractors and professional services and consolidate branches, according to Ignites, which cites an earnings presentation.
In the longer term, the firm also wants to simplify products, reduce its real estate, move clients and employees to digital solutions, and shed existing business lines that “[don’t] either fit with what we do or have the right return characteristics,” Scharf said, according to Ignites.
Scharf had also told employees earlier this year to be prepared for layoffs, but the firm decided to pause any job cuts in March in light of Covid-19.
This summer, however, the company made plans to slash tens of thousands of jobs, Ignites writes, citing a Bloomberg report. This month, news emerged that Wells Fargo has already eliminated more than 700 commercial-banking positions, with plans to make cuts across most of its business lines.
Earlier this week, a Wells Fargo spokesperson told FA-IQ that it has fired “a sizeable group” of salaried advisors, with more advisors expected to get the axe in the future.
“We anticipate that the number of advisors will continue to decline as we continue this strategy over the next couple years,” the spokesperson said, without providing specifics about which channels would be impacted.
Wells Fargo ended the third quarter with 12,908 advisors, down 390 from the 13,298 it had at the end of June and down 815 from 13,723 at the end of the third quarter of 2019.
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