Being a major financial institution is not always that much fun. Wells Fargo will certainly attest to this stressful position. More specifically, the bank got involved in a major scandal, costing them a hefty chunk of money. As a result, the institution is forced to announce major budget cuts. Nearly 900 of its nationwide branches will be closed between now and 2020. It is the logical decision, as mobile and online banking has become more attractive.
The year 2018 is not off to the best of starts for Wells Fargo. The company makes some positive headlines, but the overall tone is rather negative. More specifically, the bank’s involvement in a misselling scandal will cost them a pretty penny. Moreover, the profits are down a bit, while operational costs continue to rise. Something has to change and it seems closing hundreds of branches is the best course of action. That is not necessarily good news for the people working for this company, though.
A Bitter Pill for Wells Fargo Employees
Thanks to a major pre-tax hit, the Wells Fargo upper brass were forced to make a troublesome decision. Their ongoing regulatory issues, sales practices, and consumer-related matters are all well-documented through the US media. It is evident a lot of things have gone wrong or come to light at the worst possible time. As a result, Wells Fargo is forced to save $4bn per year by late 2019. Making the business more efficient and profitable are two catalysts for this sudden change.
As one would expect, closing bank branches is the easy way out. The institution has nearly 6,000 active branches across the US today. That number will be reduced by nearly 17% by late 2020. Throughout 2018, around 250 locations will simply cease to exist. It is unclear what will happen to the staffers who run the day-to-day operations of the affected branches. Further savings will come through third-party expense savings and a revamp of the call center and operational capacity.
Furthermore, Wells Fargo plans to improve its investments in key areas. These include AML, cyber, innovation, and technology transformation. The money for these ventures has to come from somewhere, which is another reason for closing nearly 900 branches in the coming years. They are not the only bank making such major changes, though. Rest assured other players will follow their example either this year or in the next. Bank branches are slowly on the way out, which is only to be expected. However, they will never disappear completely.
Header image courtesy of Shutterstock