Wells Fargo will slash $2 billion more in expenses, shut branches
SAN FRANCISCO — Wells Fargo, alarmed by its expenses, told investors Thursday that it will slash an additional $2 billion in expenses by 2019 — a goal that comes on top of billions in cost cuts that it promised just a few months ago.
The bank continues to combat the ongoing fallout from a scandal that erupted because Wells Fargo employees opened up to 2.1 million bogus bank accounts without the permission of customers.
Bank executives conceded Wells Fargo is not operating efficiently enough and now has a goal to reduce expenses by $4 billion a year by the end of 2019.
“Our efficiency levels are completely unacceptable,” Timothy Sloan, the banks chief executive officer, told the analysts. “We are committed to improving our efficiency.”
In January, the embattled bank had promised it would chop $2 billion in expenses by the end of 2018. Now, in a presentation to investors as part of its annual investor day conference on Thursday, bank executives vowed to chop $2 billion more in expenses by the end of 2019.
“We are looking at additional opportunities to reduce expenses,” said John Shrewsberry, Wells Fargo’s chief financial officer. “These savings will go right to the bottom line.”
Investors, though, jettisoned Wells Fargo’s shares on Thursday after the bank released a slide show that indicated the bank wouldn’t — at least initially — be operating efficiently as previously promised. The bank’s shares tumbled more than 1 percent in mid-day trades.
Since 2009, Wells Fargo has reduced the space it occupies by 22 million square feet — the equivalent of 11 regional malls the size of Valley Fair in San Jose or Sunvalley mall in Concord.
The bank intends to eliminate enough square footage during 2017 that would equate to yet another regional mall. Some of the most visible reductions will occur as a result of branch shutdowns.
“Two million more square feet will be reduced this year,” Shrewsberry said.
San Francisco-based Wells Fargo intends to shut a total of 450 branches over the course of 2017 and 2018, according to Mary Mack, senior executive vice president and head of community banking, the unit that was the center of the accounts scandal.
“We are on track to close 200 branches this year,” Mack said. “And we are on track to close 200, 250 next year.”
The bank vowed that branch shutdowns will be based, in part, on customer feedback.
Wells Fargo also is eyeing “digital” or “paperless” branches, Mack said. Wells also hopes to improve the visibility of branches through signs, digital displays and illuminated ATMs.
The bank believes it can minimize impacts to revenue and growth despite the bank closures. The full benefits of expense savings will occur one to two years after the branches are closed. Wells believes branch closures will save it $170 million a year.
“We will have the branches that are customers tell us that they need, but longer than customers need them,” Mack said.
The profile of a typical new branch is likely to be transformed, Wells said.
“We are opening smaller branches,” Mack said. “In new branches we open, 90 percent are 3,500 square feet or smaller, and 25 percent are 2,000 square feet or smaller.”