Wells Fargo CEO: Bank Making Progress Toward Lifting Asset Cap
As Wells Fargo & Co. approaches three years with a Federal Reserve-enforced asset cap of $1.93 trillion, its chief executive stressed Wednesday that the bank is making progress toward lifting restrictions.
Achieving that goal will require additional cost-cutting over the next two to four years, Charlie Scharf and chief financial officer John Shrewsberry have said. Scharf will be in his job one year on Oct. 21.
Wells Fargo has about 2,900 local employees, part of the 3,600 in its 32-county Triad West region, and 25,100 in Charlotte.
The biggest shadow hanging over Wells Fargo is the Fed order, issued Feb. 3, 2018, that prohibits the bank from increasing its total assets beyond what it had on Dec. 31, 2017. For banks, loans are considered assets.
Wells Fargo has been facing investor and political pressure over its response - or lack thereof - to regulatory orders addressing its fraudulent customer-account scandal that surfaced in September 2016.
For example, U.S. Rep. Maxine Waters, D-Calif., and chairwoman of the U.S. House Finance Services Committee, has expressed her willingness to pursue legislation that could lead to the breaking up of Wells Fargo.
Scharf told a congressional committee in March it likely will take until at least 2021 for Wells Fargo to comply with all the stipulations in the federal government's five regulatory orders.
Several analysts cited those pressures during their questions to Scharf during the earnings conference call.
On July 15, Scharf laid out a goal of cutting $10 billion, or nearly 20%, in annual expenses that is likely include a significant reduction to its workforce of 276,000 at that time. It eliminated a net 1,100 jobs during the third quarter.
The company took $718 million in restructuring charges related to severance expenses during the third quarter.
On Wednesday, Scharf told analysts that "we're taking an organized, structured approach to reviewing this across the entire company. We're reviewing near-term, medium-term and long-term actions."
"We're already working on streamlining management ranks, expense layers and other business improvements ... to make it easier for us to serve our customers and each other."
A longer-term goal is closing up to 900 branches by 2022 to reduce the total to between 5,000 and 5,100. The bank had 5,229 branches as of Sept. 30, down 77 from June 30.
The bank has stepped up branch closings early in the fourth quarter with at least 45 reported to its federal regulator as of Oct. 9.
Scharf said the bank is evaluating how to further reduce its real-estate portfolio, similar in nature to what Truist Financial Corp. has been doing recently.
"We need to be thorough in our work in three areas," Scharf said.
"The magnitude and timing of the initiatives; where we think we need to invest to drive improved operational and financial performance; and, most importantly, understanding the investments necessary to complete the build-out of our risk control infrastructure, which will ultimately satisfy our regulatory commitments.
Scharf said the bank is "focused on what we can control," citing the hiring of key risk-management officials.
"We have (experienced officials) in place who understand what is required of us is extraordinarily important," Scharf said. "There is a sense of urgency in the company that I think is different than what we had before.
"We cannot, and will not, do anything to jeopardize this work," he said.
Still, Scharf acknowledged that as long as the asset cap remains in place, "it is fair to say we will not be able to extract the full potential of the franchise."
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