Wells Fargo CEO warns of severance costs of nearly $1 billion in fourth quarter as layoffs loom

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

Patrick T. Fallon | Afp | Getty Images

Wells Fargo CEO Charlie Scharf said Tuesday that low staff turnover means the company will likely book a large severance expense in the fourth quarter.

“We’re looking at something like $750 million to a little less than a billion dollars of severance in the fourth quarter that we weren’t anticipating, just because we want to continue to focus on efficiency,” Scharf told investors during a Goldman Sachs conference in New York.

That expense is an accrual for worker layoffs that Wells Fargo expects to make next year, according to a bank spokeswoman. The company declined to say how many jobs it will cut.

Wells Fargo needs to get “more aggressive” managing headcount because employee attrition has slowed this year, Scharf added.

Wall Street leaders including Scharf and Morgan Stanley CEO James Gorman have said that unusually low attrition among their workers has left them bloated. The industry has been cutting jobs in the past year as it deals with rising funding costs, a prolonged slump in Wall Street deals and concern over loan losses.

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

Wells Fargo, the fourth biggest U.S. bank by assets, was already among the most active in laying off workers this year, thanks in part to its retrenchment from the mortgage arena. The bank 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 needing to both get more efficient, while continuing to invest in revenue-generating areas including credit cards and capital markets.

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

Under previous leadership, employees had fanned out across the country. Now, Scharf wants them near one of the bank’s office hubs. Some workers will be offered paid relocations, while others will only be offered severance. Workers who don’t opt to move may lose their roles, according to a person with knowledge of the situation.

While his actions point to caution for next year, Scharf said Tuesday that both consumers and businesses were holding up well, and that his base case for next year is “closer to a soft landing” for the U.S. economy.

Wells Fargo shares fell about 1% Tuesday.

Five big banks cut a combined 20,000 jobs in 2023
Source: CNBC