12/5/2023 WELLS FARGO CEO EXPECTS SEVERANCE EXPENSES TO EXCEED $750 MILLION (Reuters)
Wells Fargo CEO Charlie Scharf told investors he expects to book higher-than-anticipated severance expenses between $750 million to a little less than $1 billion in the fourth quarter.
Now that the stock market is tanking Charlie, the bully in chief, will try to bully the market with talk about the efficiency/severance plan started five years ago.
The numbers. I agree with @xtj that the 12/23 announcement for the 750-1Bil for "efficiency" expense was an outlier. They needed more money on top of the planned undisclosed amount. During the year they disclosed they didn't need all that money -- that it was combined with the money they spent compensating the wealth management division.
@xtj is again correct in saying that management will build in the budget for massive layoffs.
You are sc..wd at this bank if you are an IT worker. Most IT jobs can and will be outsourced. This bank will continue to initiate and expand the outsourcing. I believe the next round of offshoring will be at higher levels of IT management. It will be a new season of WFC IT Survivor.
There's only one strategy, get rid of domestic workers. "Efficiency" and "location" are just PR. If you can have 1 guy in your team if 20 in India, and you clearly can with no pushback from on high, then why does location matter at all? It doesn't. They don't give an S about collaboration, and they don't really care about cutting costs (if you fire 100,000 people and your costs go UP, yeah, it's not helping). It's just about getting rid of American workers.
offshoring = one flavor of location strategy. As a manager has headcount available (either through attrition, layoff or both) they can choose to not post domestically and fill in I or P depending on the function
location strategy = if you're not in one of the 20 enterprise locations (which does include I&P), your job will not remain. Each LOB has the option to offer relo to a domestic location, some have stated they will offer relo to everyone impacted (as long as they are "meets" or higher performance) and some LOBs will not. If someone is offered relo and they decline they get severance. if not offered relo it's a straight layoff and get severance
Regular "efficiency" layoffs - managers are continuously told "do more with less" and "no incremental headcount" which forces reorgs and outright reductions - and severance.
all of the above are included in that estimate of expenses related to displacements. and as someone else has pointed out, this is now part of the "run rate" of expenses for the corporation, so no need to call it out to analysts separately.
@1fig+1w3oeI9H You are right. Analysts won't ask these questions.
They should, but they won't. Shareholders don't care if WF's employees suffer from a toxic work environment, or if the bank is not innovative. They don't care about the causes -- they only care about the results. Sure, the causes will eventually affect the results but the analysts and the shareholders will have long made their $ and be onto the next play.
Looking at the 10-Qs I see that they combine this 750-1bill "efficiency" accrual into "Personnel expense".
So employees, could Charlie be purposely creating a toxic work environment so that you guys/gals quit and not hang around to get your severance? Charlie uses the saved money to acquire highly compensated wealth management people and build up that high-margin part of the bank. Brilliant -- but ethical?
Reference:
https://www.wellsfargo.com/assets/pdf/about/investor-relations/sec-filings/2024/third-quarter-10q.pdf
Third quarter 2024 vs. third quarter 2023
Personnel expense decreased slightly due to the impact of efficiency initiatives and lower severance expense, largely offset by higher revenue-related compensation expense driven by higher fees in our Wealth and Investment Management business
Been waiting…mo--ns run this bank.
And why would an analyst care about those questions?
Charlie, we are all comrades in this fight. Why attack own comrade?
I hope that the analyst asks them about the severance expense. I hope they pry even further and ask about the number of jobs being offshored and whether these jobs are counted as part of severance or not. I also hope they clarify the "location strategy" part of severance.
@sjv,
An analyst will engage if the Severance-Efficiency program remains unaddressed.
Maybe Charlie/MS will wait to assess the impact post-FOMC before discussing the SEE program. Each year since 2021 the company has historically discussed this program in December, always before earnings releases. Notably, in 2023, they used this to announce what we now term the "location strategy".
It appears this program might serve as a litmus test for determining and budgeting layoff numbers and how this information is presented in financial disclosures. However, there's a noticeable absence of discussion around outsourcing — specifically, the number of jobs outsourced and whether these figures are included in layoff numbers and statistics.
To date, no analyst has probed into the outsourcing aspect, which raises the question of whether the Severance-efficiency program is being utilized to potentially obscure or reframe the narrative around outsourcing efforts.
You'll need to wait for the Q4 results in January. If it's not broken out, I'm sure an analyst will ask.
2024 is an outlier in that they greatly expanded upon their original plan for downsizing. This is why they needed another $1B on top of the planned amount. This coming year the initial budget will have massive layoff expenses already built in, so there's no need to expand the budget for that further. Expect another 12-15k people to be downsized in 2025, and likely 2026 and 2027 as well. No one outside HY knows what number of domestic FTE they are shooting for, but I'd guess 100k or less.