Wells Fargo’s CEO warns of severance costs as layoffs approach

  • Low employee turnover means the company will likely book significant severance expenses in the fourth quarter, Wells Fargo CEO Charlie Scharf said.
  • “We’re looking at somewhere between $750 million to just under $1 billion of severance pay in the fourth quarter which we weren’t expecting,” Scharf told investors.
  • These expenses are a backlog of layoffs Wells Fargo expects to make next year, according to a bank spokeswoman.

Charlie Scharf, CEO of Wells Fargo, speaks during the Milken Institute Global Conference in Beverly Hills, California on May 2, 2023. He speaks during the Milken Institute Global Conference in Beverly Hills, California on May 2, 2023.

Patrick T. Fallon | AFP | Getty Images

Low employee turnover means the company will likely book significant severance expenses in the fourth quarter, Wells Fargo CEO Charlie Scharf said Tuesday.

“We’re looking at somewhere between $750 million to just under $1 billion of severance pay in the fourth quarter that we didn’t anticipate, just because we want to continue to focus on efficiency,” Scharf told investors during a Goldman Sachs meeting. Conference in New York.

These expenses are a backlog of layoffs Wells Fargo expects to make next year, according to a bank spokeswoman. The company declined to specify how many jobs it would eliminate.

Scharf added that Wells Fargo needs to have a “more aggressive” headcount in management because employee attrition has slowed this year.

Wall Street leaders, including Scharf and Morgan Stanley CEO James Gorman, said unusually low attrition among their staff has left them bloated. The industry has cut jobs in the past year as it deals with rising financing costs, a prolonged decline in Wall Street deals and concerns about loan losses.

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Read more: Big banks are quietly laying off thousands of employees, and more layoffs are coming

Wells Fargo, the fourth-largest US bank by assets, was among the banks most active in laying off workers this year, thanks in part to reducing its mortgage expenses. The bank has cut about 11,300 jobs so far in 2023, or 4.7% of its workforce, and had 227,363 employees as of September.

Scharf spoke of the need to increase efficiency, while continuing to invest in income-generating areas including credit cards and capital markets.

The bank is “not even close” to where it should be in terms of efficiency, Scharf said.

Under the previous leadership, staff were spread across the country. Now Scharf wants them near one of the bank’s office centers. Some workers will be offered paid transfers, while others will only be offered severance pay. Workers who don’t choose to transition could lose their roles, according to a person familiar with the situation.

While his actions indicate caution for the year ahead, Scharf said Tuesday that consumers and businesses are in good shape, and that his fundamental forecast for next year is “closer to a soft landing” for the US economy.

Wells Fargo shares fell about 1% on Tuesday.

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