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At a time when major U.S. banks have put the brakes on job cuts amid the coronavirus pandemic, Wells Fargo WFC is doing otherwise. Per a Bloomberg report, early this month, the bank resumed its retrenchment process under the mounting pressure for cost reduction, terminating a number of positions, with the plan of rigorous job cuts in the coming period.
"Starting in early August, we resumed regular job displacement activity," a spokesperson for the bank told Bloomberg. "We are at the beginning of a multiyear effort to build a stronger, more efficient company. We expect to reduce the size of our workforce through a combination of attrition, the elimination of open roles and job displacements,” he added.
Wells Fargo, which has been witnessing a significant rise in operating expenses since the revelation of the sales scandal in 2016, hasn’t undertaken any large-scale job cut over the past decade. Now, with the heightening pressure to boost financials amid the coronavirus pandemic-related concerns, the bank intends to shrink its workforce. As of Jun 30, 2020, it had approximately 266,300 employees.
The company’s CEO Charlie Scharf had already raised concerns over its inflating costs, stating “our expenses are way too high”, during an investor conference in May. Therefore, with the expected layoffs, this was the bank’s first move, following Scharf’s announcement during the second-quarter earnings call in July of reducing annual expenses by $10 billion.
Wells Fargo’s cost-cutting plans would also include branch closures and consolidation, along with retrenchment of tens of thousands of workers. Notably, the affected employees would be provided with severance and career assistance by the bank.
Since joining Wells Fargo in October 2019, Scharf has been reviewing the company’s businesses. He has been developing strategies that are expected to make some reductions in workforce. Wells Fargo’s sales scam allegation has resulted in many setbacks, including the banking giant’s tainted image, numerous lawsuits, triggered federal and state investigations, and congressional hearings. Moreover, the bank has been unable to maintain profitability as compared with the set targets.
It also aims to control costs through consolidating its operations, processes’ improvement through technology and mechanization, as well as the outsourcing of certain operations.
Currently, Wells Fargo carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Over the past few months, Wells Fargo has moved away from several businesses, including student lending, home equity loans, jumbo loan refinancing and independent auto dealerships.
However, investors don’t seem to be happy with these initiatives. The company’s shares have plunged 56% so far this year. This is way below other big banks, such as JPMorgan JPM, Bank of America BAC and Citigroup C. Also, it is below the industry’s decline of 35.7% during the same time frame.
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