Wells Fargo (WFC) Continues With Mortgage Operational Layoffs
Continuing with job cuts, Wells FargoWFC is slashing 638 more jobs in its mortgage operations due to subdued activity in the U.S. housing market, per Wells Fargo spokesman Tom Goyda. These layoffs will be in Orlando, FL; Ranch Cordova, CA; Colorado Springs, CO; and Charlotte, NC.
The company has provided a 60-day notice to its employees and also notified state-employment offices in the various locations. The affected people are eligible for pay and benefits till Oct 21. Also, Wells Fargo will make full effort to help them find another job within the company. Further, these employees might be eligible for the bank's salary-continuation plan attributed to years of service.
"After carefully evaluating market conditions and consumer needs, we are reducing to better align with current volumes," Goyda said. Specifically, job cuts are planned in back-office of mortgage operations, including loan servicing and retail fulfillment.
Wells Fargo has taken this decision to better align staff levels with the present sales volume. The U.S. mortgage market is facing declining origination volumes as mortgage rates are becoming expensive. Furthermore, fierce competition and falling supplies of homes for sale has adversely impacted housing demand.
Notably, Wells Fargo's mortgage banking income plunged 33% in the second quarter of 2018, on a year-over-year basis.
Similar Layoffs by Other Banks
Wells Fargo is not the only company to be impacted by declining mortgage activity. Other mortgage lenders have also announced layoffs in 2018, while some have shut down the segment altogether.
In late May, Movement Mortgage, a South Carolina-based mortgage lender, announced the decision to lay off about 100 employees after having already reduced its workforce by 75 employees earlier this February.
Also, U.S. Bancorp's USB banking subsidiary - U.S. Bank - announced that it will cut 260 jobs, as it plans to close its Bedford mortgage and consumer banking office.
In addition, MB Financial MBFI announced its plans this April to shut down the company's national mortgage origination business, which resulted in the layoff of almost 600 employees at locations across Southeast Michigan.
Wells Fargo's sales scam allegation has led to many setbacks, including the bank's shattered image, numerous lawsuits, triggered federal and state investigations, and congressional hearings. Moreover, the bank was unable to maintain profitability as compared to the set targets.
Therefore, Wells Fargo has doubled its cost-cutting program to $4 billion. The bank aims to control costs through consolidating operations, processes improvement through technology and mechanization, as well as outsourcing of certain operations.
While the current crisis at Wells Fargo will take some time to alleviate, we believe the bank's initiatives will support its growth profile, moving ahead.
Currently, Wells Fargo carries a Zacks Rank #3 (Hold).
Wells Fargo's shares have declined 3.3% year to date compared with 1.3% growth recorded by the industry .
A better-ranked bank, Comerica Incorporated CMA , has been witnessing upward estimate revisions for the last 60 days. Additionally, the stock has jumped more than 13% so far, this year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
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