Wells Fargo to Cut 3,800 Jobs, Close Financing Unit
By Dakin Campbell
Jul 7, 2010
Wells Fargo & Co., the fourth-largest U.S. bank by assets, said it will eliminate 3,800 jobs, or about 1.4 percent of its total workforce, and close its consumer- finance unit.
The lender will take a charge of $185 million, with $137 million, or 2 cents a share, in the second quarter, the San Francisco-based company said today in a statement. Wells Fargo will close 638 independent consumer-finance branches and stop making non-prime home loans, the statement said.
“The economics of a separate Wells Fargo Financial channel are no longer viable, especially now that our customers have access to the largest banking and mortgage store network in the United States,” David Kvamme, president of the unit, said in the statement.
Wells Fargo, which purchased Wachovia Corp. for $12.7 billion in 2008, is the top mortgage lender in the U.S. Auto, home and credit-card loans will continue to be made from retail branches, according to the statement. Less than 2 percent of the bank’s real estate loans were originated in the Wells Fargo Financial network.
“You will probably make more in efficiencies than you will give up in restructuring charges,” Christopher Mutascio, an analyst with Stifel Nicolaus & Co., said in a telephone interview. “It’s been a value-added franchise but it makes perfect sense when it comes to the branch rationalization.”
Wells Fargo operates 6,600 retail branches and 2,200 mortgage offices, the most of any U.S. bank, the statement said. Wells Fargo Financial is the division that sold consumer loans and mortgages, including subprime at one time and home-equity loans, to borrowers with blemished credit.
Bank Settles Claim
Wells Fargo paid $6.8 million in April 2007 to settle a claim that accused the unit of obscuring fees and penalties on subprime mortgages between 1999 and 2005.
Wells Fargo Financial employed about 14,000 workers and most will be reassigned to other areas of the bank, the statement said. Wells Fargo had 267,400 employees at the end of the first quarter.
Wells Fargo rose $1.51, or 6 percent, to $26.66 in New York Stock Exchange composite trading today. It has fallen 1.2 percent this year.