Is Wells Fargo closing enough branches?

As digital customers bypass bank branches -- and in the wake of its phony-accounts-for-cash scandal -- Wells Fargo & Co. closed 84 of its 6,300 branches in the fall, and plans to close 200 this year, plus 200 next year, chief financial officer John Shrewsberry told investors at the banking giant's Jan. 13 year-end conference call.

Wall Street's reaction: Is that all?

"Can you do a little bit more there?" analyst Saul Martinez of UBS Securities asked Shrewsberry's boss, Timothy Sloan, who took over as CEO when the scandal forced John Stumpf out at Wells Fargo, by far the leading branch-banking system in Philadelphia and dozens of other U.S. metro markets.

"It's about 3 percent of your branch network," Martinez said. "You've closed fewer branches than perhaps some of your peers." Maybe it's time to "pull the cost lever harder" through "more aggressive branch rationalization," he urged.

Sloan agreed, saying, "More transactions are occurring outside the branch," and "we should increase the pace" of branch closings. But he refused to commit beyond the 400 additional closures, for now.

As I wrote last year, U.S. banks have closed 10,000 of the 100,000 branches that dotted shopping districts across the country at the industry's peak in the mid-2000s.

Wells Fargo's former bonus system, which the bank admits managers and thousands of employees abused by setting up accounts without customers' permission, had been part of an aggressive marketing effort to wring profits from the branch network -- built on offices opened by Philadelphia National, Fidelity, Girard, and scores of other banks acquired by the company through a long string of disruptive mergers.

Now, Wells Fargo has to find other ways to motivate tellers, salespeople, and branch managers to sign up new depositors, borrowers and investors.

Sloan noted that many of the branches to close will likely be near other Wells Fargo branches, making it easier for employees and customers to transfer. Wells Fargo may still open a few more branches, as needed, he added. "We will be providing more details on our branch distribution strategy at our Investor Day" in May, he concluded.

Investors weren't too impressed. Wells Fargo has managed to avoid losing customers in the wake of last fall's scandal, but its growth ahead looks "far more challenging," bank analyst R. Scott Siefers told clients at Sandler O'Neill + Partners.

David J. Long, of Raymond James & Associates, told clients that the bank was less profitable than expected last year and that growth has slowed. He expects Wells Fargo's stock, which fell below peers last year, will continue to "underperform."

Separately, Sloan noted that Wells Fargo had boosted pay for the lowest-paid 26,000 of its nearly 270,000 employees. "We increased our minimum hourly pay rate to a range of $13.50 to $17 an hour, a 12 percent increase from the previous minimum rate and 86 percent higher than the national minimum wage. We believe this increase is the right thing to do for our team members."

How much, veteran banking analyst Gerard Cassidy of RBC asked, will higher wages for low-paid workers cost?

Sloan wouldn't say: Wells Fargo gets back part of its out-of-pocket cost through "lower turnover," which "means lower training costs."