Wells Fargo has announced that it 'expects headcount to decline by 5% to 10% over the next three years, through a combination of cuts and regular attrition' according to an article at BBC.com. It seems its been hit by a combination of industry trends -- a shift to more online business -- and self-inflicted wounds in the terms of a series of scandals. As the BBC notes 'in February, the US Federal Reserve, citing "widespread consumer abuses and other compliance breakdowns", issued an unprecedented order that restricted the firm's growth pending governance improvements.'
Wells tried to put a positive spin on things be stressing expense save of roughly $3 billion by 2020 and that they would be 'enhancing our focus on customers, strengthening risk management and controls, simplifying our organization, and improving the team member experience.' Following the new account opening scandal followed by separate issues in mortgage and auto lending they could use a little positive spin.
It's true that more business is shifting to online channels. This may be particularly true in residential mortgages, one of Wells' largest businesses. Competitors like Quicken/Rocket Mortgage are grabbing share of a smaller pie as higher rates curtail refinance volume.
The Wall Street Journal reports that the 'timing of this Wells Fargo announcement, combined with last week’s warning on loans, is a bad signal for third-quarter earnings. The stock is modestly lower, even as rivals have gained. This suggests investors expect an underwhelming, but not sharply weaker quarter. The bigger concern beyond the quarter is the lack of a clear path for Wells Fargo to resume growth.' As the economy grows and Wells doesn't the market will need to begin thinking about whether Wells will be able to escape the regulatory restrictions and reputation damage any time soon or at all.