Wells Fargo Shutting Down Branches to Cut Costs
One of the biggest American banks, Wells Fargo & Co (NYSE:WFC), has announced that it will be closing 450 of its bank branches across the country by the end of 2018. This is 50 branches more than the 400 branches that management had announced earlier this year.
The news announcement was made at the bank’s investor day conference held earlier in May. Staci Schiller, a spokesperson for the company, stated that the bank closed 48 branches through the month of April and is on its way to closing a total of 200 branches in 2017. The rest of the 250 branches will be closed by the end of 2018.
The bank has also warned that more branch closures might follow in 2019.
Management is estimating to save roughly $4.0 billion in annual costs following these closures and some other cost-cutting efforts.
Wells Fargo has been adapting its business model with shifting industry trends as more and more banking customers are opting for digital banking.
The bank notes that in 2015, 75% of new credit card accounts were opened at a Wells Fargo branch. However, this year’s first quarter showed that only 50% of the same accounts opened through a branch. On the contrary, an increasing number of customers opted to open new accounts through the bank’s web site. (Source: Los Angeles Times, op cit.)
The closures are also, in part, a result of the bank’s efforts to curtail rising expenses pertaining to increasing employee salaries and additional costs related to the fake-accounts scandal Wells Fargo faced last year.
The scandal has been bad for both the bank’s reputation and its business. The bank stated that it made three percent fewer loans in the first quarter than expected, losing roughly $1.0 billion in potential loans. Wells Fargo has also been missing the market’s revenue expectations in recent quarters.
The bank management is now changing its strategy of conducting business. As the company shifts its focus towards its online customer base, more branch closings are expected to follow. Wells Fargo fired 5,300 employees in September 2016, following the fake-account scandal. The branch closures will lead thousands more at the bank to face layoffs.
“With business still reeling, Wells Fargo plans more cost cutting and digital initiatives,” Los Angeles Times, May 11, 2017.
“Wells Fargo closing 450 branches by 2019,” Dispatch/Argus, May 12, 2017.