Wells Fargo considers cutting thousands of jobs

Wells Fargo is considering cutting thousands of jobs as part of a broad strategic review to restore the bank’s profits from unsustainably low levels, according to a person familiar with the situation.

America’s third-biggest bank, which employs 263,000 globally, has said it will cut dividends in the third quarter because of new Fed rules capping payouts so they could not exceed average recent earnings.

Another round of multibillion-dollar loan loss provisions is expected to leave the San Francisco-headquartered bank with net income of just $9m for the second quarter, down from the $6.2bn it earned a year earlier, according to analysts in a Bloomberg poll.

Bloomberg reported on Thursday that Wells could cut thousands of jobs as soon as this year. The person familiar with the situation confirmed the possible cuts to the Financial Times but stressed that no decision had been made.

“We’re looking at expenses and doing a full strategic review,” the person said, adding that the bank needed to make savings because its financial performance was “not very good”. Wells Fargo declined to comment.

The cuts would mark the first round of major lay-offs at a US bank since the beginning of the coronavirus pandemic. Banks have largely tried to avoid firing staff as they brace themselves for enormous loan losses triggered by the deep global recession.

The four biggest lenders — Wells, Citigroup, JPMorgan Chase and Bank of America — are expected to collectively report close to $25bn of loan loss provisions in their second-quarter earnings next week. That is a touch higher than the $24bn they recorded in the first quarter, and their highest loan losses since the financial crisis more than a decade ago.

Wells said in March that it had “paused” new lay-offs as the US economy was ravaged by the virus, but unlike other banks such as Morgan Stanley, it did not commit to no lay-offs at all this year. The person familiar with the situation said such a commitment would have been overly constraining given Wells’ financial situation.

Wells’ earnings have frequently disappointed in recent years, as the bank struggled to recover from a 2016 fake accounts scandal that cost it $3bn in fines and penalties and did untold damage to its reputation among customers and regulators.

Wells’ chief financial officer John Shrewsberry said in June that “at some point this year” the bank would have to resume programmes to cut its total expense base, including headcount and real estate. The bank continues to operate under a number of regulatory constraints, including a cap on the size of its balance sheet.