Chief Wells Wells Fargo to announce cost cutting plan

(Reuters) – Wells Fargo & Co CEO Charlie Scharf will give investors more details about the long-awaited turnaround plan for the bank scandal this week.

While Wall Street expects Wells Fargo to report a 38% profit decline Friday against the backdrop of coronavirus pandemic, investors have become more bullish in anticipation of details of broad plans for cost cuts. Wells Fargo shares have jumped 45% since Scharf unveiled a strategic update in October, outperforming JPMorgan Chase & Co and Bank of America Corp.

Wells Fargo’s management has promised a transformation from its 2016 false account scandal with little to show for the effort, but it feels different now, said Raymond James analyst David Long.

“Scharf has radically changed its internal view to make the management of the bank a top priority,” Long said.

Scharf began making changes shortly after taking the lead in October 2019, though it has yet to set strong targets or timelines for progress. He joined a group of external executives, reviewed the reporting areas, and began shearing non-core businesses. It also implemented weekly and monthly reviews to increase oversight and address regulator concerns more effectively.

In a sign of progress in repairing Wells Fargo ‘s relationship with regulators, the Office of the Currency Regulator finalized a permit order related to counterfeiting against the bank earlier this month.

But Wells ’biggest hurdles remain and there is a long way to go to catch up with peers. Efficiency ratios across the major business lines in Wells significantly weaken other major banks. In addition, the continuing need for expenditure to satisfy regulators and the presence of a punitive asset cap until Wells confirms that it has fixed the risk management failures that led to customer abuse will continue. further hampering the bank’s ability to compete effectively.

“Other banks have not operated under these licensing orders so they have been able to spend a lot of time thinking about operational efficiency and the future,” Long said. “Wells didn’t.”