Banks in trouble tend to lay people off—and they don’t tend to be shy about it. The existentially-threatened Deutsche Bank is cutting 18,000 jobs—eventually. HSBC is doubling that, with 35,000 positions set to go. Even those banks not in any particular trouble make some layoffs, just in case.
Wells Fargo is certainly a bank in trouble, and in need of some significant cost savings as it faces (remarkably, it must be said) its first quarterly loss in a decade. And yet today, Wells employs almost as many people as it did a decade ago, spending more than 40% of its revenues on compensation. By contrast, Bank of America—which employed even more people than Wells did in 2010—now has reduced its headcount by 80,000, and pays out only 35% of its revenue to employees (Citi spends just 29%). Which is all a long way of saying that Wells has needed to do more than merely suggest strongly that people ought to look for jobs elsewhere for some time, and that time may be up, global pandemic notwithstanding.
Pressure to dramatically reduce costs is coming to a head inside the bank, prompting executives to draft plans that may ultimately eliminate tens of thousands of positions, people with knowledge of the confidential talks said… Executives haven’t yet adopted a specific target for shrinking the bank’s workforce of about 263,000, and they aren’t likely to detail a plan when posting quarterly results…. Some firms, including Goldman Sachs Group Inc., have indicated they’ll maintain their pledge [to postpone layoffs] through the end of the 2020. Wells Fargo has been more conservative, implementing a shorter moratorium and then adjusting it, people with knowledge of the planning said. Its current freeze expires this month, though it could be extended.
This will, of course, be painful for the presumably tens of thousands of people collectively hundreds of thousands of pounds heavier today than before signing up with the stagecoach, but also a warning to everyone else, as other banks hide behind Wells’ move to make sure that Charlie Scharf’s operation is never as efficient as their own.
Lenders including JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. plan to maintain their payouts this quarter. But as the Fed keeps an eye on mounting U.S. infections, it has said it could eventually restrict how much banks pay out using a formula based on earnings. If Wells Fargo offsets the pain for its shareholders by cutting compensation expenses, that could set a precedent for others in the industry.