Charlie Scharf, the CEO of Wells Fargo, told investors on Tuesday that he expects fourth-quarter expenses to exceed between $750 million and less than a billion dollars.
Focus on Efficiency and Workforce Reduction
Scharf stated that they continue to focus on efficiency with declining transfers, and unfortunately, they will have to be more aggressive in their internal actions, adding that he believes it will be the right step in the long run.
Workforce Reduction and Regulatory Challenges
Last month, the bank laid off fewer than 50 bankers from its corporate and investment division, after the San Francisco-based bank previously warned of a potential decline in its workforce to enhance efficiency.
The bank has reduced its workforce since the third quarter of 2020, with the number of employees standing at 227,363 at the end of the third quarter of this year.
The bank is still operating under an asset cap preventing it from growing until lawmakers consider it has resolved the issues from the fake accounts scandal. The bank still faces nine open consent orders from banking regulators that require additional oversight of its practices.
Financial Challenges and Future Outlook
Scharf stated during his talk to investors at the Goldman Sachs Financial Services Conference in the U.S. that management’s priority includes lifting the consent orders.
The largest bank in the U.S. has seen some weakness in its commercial real estate portfolio, particularly in office loans.
$359 million has been allocated for potential credit losses on commercial properties in the third quarter, raising total reserves to $2.6 billion for the first nine months of 2023.
Despite rising interest rates and fears of an economic contraction, Scharf noted that the economy remains strong but warned about entering 2024.
Scharf added that the consumer remains strong and credit card growth for the bank may increase.
Improving Efficiency and Preparing for the Future
Wells Fargo has scaled back auto lending as well as reduced the size of its mortgage portfolio.
According to executives from the largest U.S. banks, American consumers remain in a strong financial position, but spending has slowed in recent months, and more Americans are beginning to default on their loans.
Source: Reuters
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