After years of expansion fed by disruptive mergers and an aggressive sales culture, Wells Fargo & Co. has given up on raw growth and is doubling down on cutting cost.
The bank — the dominant lender in Philadelphia and many other metro markets, with 6,300 branches, more than any other U.S. bank — plans to shave an additional $2 billion in expenses over the next two years. That's on top of $2 billion in previously scheduled cuts, chief financial officer John Shrewsberry said at an investor conference in San Francisco.
Wells Fargo spent around $53 billion last year, including $32 billion to pay its 275,000 employees. The rest went for buildings, equipment, technology, outsourced vendors, and other operating expenses.
As if depressed by Wells Fargo's admission that it no longer hopes to grow its way to prosperity — and not inspired by the prospect of lower expenses boosting profits — traders sold Wells Fargo, whose shares fell more Thursday than any other bank in the KBW index of 24 major bank stocks.
Shares of the San Francisco-based bank fell 98 cents, or 1.8 percent, to $53.74.
The stock hit an all-time high of just under $60 in March on hopes that it had left behind last year's phony-account scandal, which is costing the bank more than $500 million in fines and other expenses. But the bank's first-quarter earnings showed it was struggling to boost sales and profits, which have been flat at around $4 a share, for the past three years.
That still adds up to profits of more than $5 billion a quarter, with a higher profit margin than JPMorgan, PNC, or Bank of America. But Wells Fargo has struggled to improve. "Operating at this level is completely unacceptable," CEO Tim Sloan said at his company's presentation in San Francisco, according to Bloomberg LP.
According to Shrewsberry, Wells Fargo plans to cut $1.3 billion this year by "centralizing" its marketing, human-resources, finance, technology, data and customer centers, and other operations; $200 million by firing consultants and "insourcing" more services; $320 million by closing branches and combining other facilities; $100 million by cutting compensation and benefit costs; and $100 million by reducing travel.
Next year, the bank plans to cut another $2 billion by combining operations, automating processes, outsourcing (apparently reversing its outsourcing moves for this year), "rationalizing product sets," and adopting "best industry practices to our call centers," plus "ongoing reduction in facilities."
The bank had earlier said it plans to close 200 branches this year, up from 60 last year, and shut another 200 branches next year.