Wells Fargo will cut up to 26,450 jobs in the next three years, the bank said Thursday.
The scandal-plagued lender announced plans to reduce its headcount by 5%-10% by as part of its goal to reduce costs by $4 billion by 2020, according to a Reuters report. The bank has also said it would cut about 800 branches and sell off non-core businesses.
The bank has already been slashing jobs. Last month, it laid off 600 employees in its mortgage division in response to rising rates and a slowdown in refinances.
The cuts may help Wells Fargo raise its profits without violating the asset cap imposed by the Federal Reserve in response to its many scandals.
Brian Kleinhanzl, an analyst with Keefe Bruyette & Woods, told Reuters that the job cuts weren’t surprising.
“Employee-related costs are the largest expense, so that was likely where the cuts were coming,” he said. “Automation also lowers the need for staffing over time.”
Wells Fargo said the cuts were being made to reflect changing consumer needs. That assertion rang hollow with some market observers.
“The message was, ‘We’re trying to meet customer needs better by cutting staff by 10%,’ which is laughable,” Portales Partners analyst Charles Peabody told CNBC. “They’re cutting expenses because they’ve got a revenue problem, not to meet their customers’ needs better.”
The many scandals at the bank have taken their toll. Wells Fargo was the only major US bank to report lower year-over-year revenue in the second quarter, according to a CNBC report. It was also the only bank that hasn’t significantly improved earnings since the Trump administration’s tax cut.
With the bank’s earnings depressed in what should be boom times, Peabody and other observers have theorized that CEO Tim Sloan is, in effect, cutting other people’s jobs in an attempt to save his own. There have already been rumors – denied by Wells Fargo – that the bank courted former National Economic Council head Gary Cohn to replace Sloan.
“I think they’re going to have a tough time growing earnings, and Sloan is going to have a tough time surviving the next few years,” Peabody told CNBC.