Wells Fargo plans thousands of job cuts as JP Morgan and other banks boom

Finance


Thanks to “widespread consumer abuses,” the Federal Reserve has limited Wells Fargo from growing in assets, which has stymied loan growth. As a result, Wells Fargo is the only bank that hasn’t significantly improved earnings after the administration’s tax cut, according to Peabody.

This comes despite a U.S. economy that is growing at the fastest pace in a decade. Stocks are at record highs, unemployment is at record lows and interest rates are rising. These are ideal conditions for banks, which take in deposits and make loans, pocketing the difference in interest rates on the products.

J.P. Morgan Chase, the biggest U.S. bank, has said it was opening branches in markets where it didn’t already have a presence. When asked about the threat that technology poses to bank jobs, CEO Jamie Dimon has said he expected the headcount to remain steady because new positions are being created.

In the second quarter, Wells Fargo was the only major U.S. bank to report lower year-over-year revenue, and it had the worst efficiency ratio at 66.7 percent. The metric, followed by analysts and investors, measures how much expenses consume revenue, and the lower, the better. Competitors including J.P. Morgan were almost 10 percentage points better than Wells Fargo.

Peabody figures that by the time the legal and regulatory scrutiny lifts and the bank is allowed to start growing again, the U.S. could be facing a recession. This leads him to one conclusion: Sloan’s job is in jeopardy.

“I think they’re going to have a tough time growing earnings,” Peabody said, “and Sloan is going to have a tough time surviving the next few years.”

The bank denied recent rumors this week that former Goldman Sachs executive and top Trump economic aide Gary Cohn was potentially replacing Sloan. Betsy Duke, chair of Wells Fargo’s board of directors, said in statement that the CEO “has the unanimous support of the board, and this support has never wavered.”

After the cuts were announced, the bank was likely hoping for a boost to its stock. By the end of Thursday’s trading, the shares had climbed just 0.6 percent. Meanwhile, as higher interest rates boosted the whole sector, J.P. Morgan shares ended the day up 0.9 percent.



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